Notice: Millenium Challenge Act: Armenia

Thursday,
April 13, 2006
Part IV
Millennium
Challenge
Corporation
Notice of Entering Into a Compact With
the Government of the Republic of
Armenia; Notice
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19392 Federal Register / Vol. 71, No. 71 / Thursday, April 13, 2006 / Notices
MILLENNIUM CHALLENGE 1994, Armenia adopted a Rehabilitation Project and an Irrigated

CORPORATION comprehensive stabilization and reform Agriculture Project.
program that transformed it into a A. Rural Road Rehabilitation Project
[MCC FR 06–07]
liberal market economy and launched a ($67 million): This project will
Notice of Entering Into a Compact With period of uninterrupted growth that saw rehabilitate up to 943 km of rural roads,
the Government of the Republic of its GDP increase at an average annual or 35% of the government-proposed
Armenia rate of 8% over the next decade. Today, lifeline road network. When complete,
the per-capita GDP of Armenia’s 3.2 the lifeline network will ensure that
AGENCY: Millennium Challenge million inhabitants is estimated at every rural community has essential
Corporation. $1,100. Economic growth to date has road access to markets, social services
ACTION: Notice. disproportionately benefited inhabitants and the main road/interstate network. In
of the capital, Yerevan, and the rural addition, funding will be provided to
SUMMARY: In accordance with Section
poverty rate remains above 30%. More the Armenian Road Directorate for a
610(b)(2) of the Millennium Challenge
than one million Armenians, or about technical audit of the ongoing
Act of 2003 (Pub. L. 108–199, Division
35% of the population, live in rural maintenance contracts and for a road
D), the Millennium Challenge
areas and are dependant on semi- maintenance strategic plan.
Corporation (MCC) is publishing a
subsistence agriculture. These farmers B. Irrigated Agriculture Project ($146
summary and the complete text of the
are operating on small, fragmented million): This project includes two
Millennium Challenge Compact
parcels of land and are constrained by activities:
between the United States of America,
poor infrastructure and an • The Infrastructure Activity ($113
acting through the Millennium
underdeveloped agricultural economy. million) will rehabilitate up to 21
Challenge Corporation, and the
targeted irrigation infrastructure
Government of the Republic of Armenia. The $235 million Millennium
schemes across the country, expanding
Representatives of the United States Challenge Compact with the Republic of the total area under irrigated production
Government and the Government of the Armenia is focused on the reduction of and improving the overall efficiency of
Republic of Armenia executed the rural poverty through a sustainable sourcing and delivery of water to
Compact documents on March, 27, increase in the economic performance of farmers.
2006. the agricultural sector. The Program to • The Water-to-Market Activity ($33
Dated: April 6, 2006. be funded under the Compact will million) will build the management
Jon A. Dyck, advance this goal through a five-year capacities of the local and national
Vice President & General Counsel, program of strategic investments in rural water supply entities and support the
Millennium Challenge Corporation. roads, irrigation infrastructure and transition to higher-value agricultural
technical assistance, and financial systems of some 60,000 farmers by
Summary of Millennium Challenge support to water supply entities,
Compact With the Government of the providing technical and rural credit
farmers, and commercial agribusinesses assistance. This will ensure the
Republic of Armenia (the ‘‘Program’’). sustainable management of the
I. Introduction improved irrigation infrastructure and
II. Program Overview and Budget
A small, landlocked country in the enable the emergence of profitable
Caucasus region, Armenia is struggling To transform the economic farming operations.
to recover from the severe economic performance of Armenia’s agricultural The following table outlines the MCA
setbacks caused by the collapse of the sector and reduce rural poverty, the contribution to the Program by year and
Soviet Union in the early 1990s. In Program will undertake a Rural Road category.
Timeline
Description Total
CY1 CY2 CY3 CY4 CY5
($US mil) ($US mil) ($US mil) ($US mil) ($US mil)
Rural Road Rehabilitation Project ................................... 0.89 18.32 23.32 14.16 10.40 67.10
Irrigated Agriculture Project ............................................. 8.24 37.24 41.23 34.20 24.77 145.67
Program Administration and Audits ................................. 2.06 4.12 4.69 3.81 3.11 17.79
Monitoring and Evaluation ............................................... 1.44 0.92 0.95 0.97 0.81 5.08
Total* ......................................................................... 12.63 60.61 70.20 53.13 39.09 235.65

* Total amounts may not sum due to rounding.
III. Impact rural poverty are expected with a communities connected by the portion
sustained transformation of the of the road network to be rehabilitated
The Program will directly impact
agricultural sector. with MCC funds.
approximately 750,000 people, or 75%
of the rural population, increasing their The Rural Road Rehabilitation Project The Irrigated Agriculture Project will
annual income by an estimated $36 will reduce transport costs for the benefit approximately 250,000 farmer
million in 2010 and over $113 million greater rural community, including households, 34% of which are headed
in 2015. This corresponds to farmers and processors, by an estimated by women. The Infrastructure Activity
agricultural value-added gains of 4% $20 million annually beginning five improvements will extend irrigation to
and 11% over the same periods. By years after material project benefits are an additional 46,000 hectares (114,000
2013, the rural poverty rate is projected realized. The principal beneficiaries of acres) of new and recovered farmland,
to fall by 5 percentage points as a result this project will be approximately expanding the total area under irrigated
of the Program. Continued reductions in 360,000 rural Armenians living in 265 production by more than 40%.
Federal Register / Vol. 71, No. 71 / Thursday, April 13, 2006 / Notices 19393
Technical support provided under the be implemented by the Armenian Road procurement activity quarterly for
Water-to-Market Activity will enable Directorate, and the Infrastructure compliance with MCC requirements.
over 60,000 participating farmers to Activity of the Irrigated Agriculture V. Assessment
increase their average net incomes by Project will be implemented by the
approximately 25% through the Irrigation Project Implementation Unit A. Economic Analysis
adoption of improved on-farm water previously established by the World The projects included in the Program
management techniques and the Bank. Implementation of the Water-to- represent sound investments that will
cultivation of higher-value agriculture. Market Activity of the Irrigated alleviate key constraints to economic
The Water-to-Market Activity will also Agriculture Project will be contracted growth and poverty reduction in rural
boost the development of small- and out to a private firm or non-
medium-sized agribusinesses by Armenia. Economic rates of return
governmental organization (‘‘NGO’’). (‘‘ERRs’’) were calculated for each
expanding rural access to credit and
providing training in post-harvest A third-party non-government entity infrastructure investment and technical
processing and marketing. will be engaged to provide fiscal agent assistance activity to select the highest
services to MCA-Armenia, including return projects. These returns, which
IV. Program Management funds control, disbursement were modeled by the GOA’s transaction
The GOA will create a legal entity, documentation and management, cash team and reviewed by MCC, quantify
MCA-Armenia, to manage and oversee management and accounting. The fiscal the expected incremental increase in
the Program. MCA-Armenia will consist agent will have sole signatory authority income from each individual activity.
of a Governing Council and a to authorize re-disbursements from the For the Rural Road Rehabilitation
Management Unit. The Governing MCA-Armenia bank account into which Project, savings in transport costs were
Council, responsible for making key MCC funds will be disbursed. estimated. For the Irrigated Agriculture
strategic and management decisions, Project, quantified benefits include
will be chaired by the Prime Minister The World Bank procurement additional income from newly irrigated
and include voting representatives from guidelines—modified as necessary to land, the increase in high value-added
both government and civil society. The conform to MCC policies—will be used crop cultivation, higher yields, lower
Management Unit will include technical for procurement of the works, goods and production costs, and energy and water
experts and be responsible for the day- consulting services needed under the savings. The economic rates of return of
to-day management of the Program. Program. MCC will review and approve each of the activities were compared to
Project implementation will be procurement plans on a periodic basis, a benchmark of 12.5%, the average real
carried out by three separate entities as well as quarterly reports of all growth rate for the past three years. The
reporting to the Management Unit. The completed procurement actions. overall economic rate of return of the
Rural Road Rehabilitation Project will Independent auditors will also audit the Compact is estimated at 25%.
ERR for the

Project ERR
Scenario Key underlying assumptions Armenia
(percent) Compact
Base case ...................................... Base traffic estimates and cost estimates ............................................. Roads—26 ......... 25
Base benefit and cost estimates ............................................................ Irrigation—25 ......
Low return case 1 .......................... Cost increase of 30% ............................................................................. Roads—21 ......... 20
Irrigation—20 ......
Low return case 2 .......................... Current traffic is only 50% of estimated value ....................................... Roads—18 ......... 18
Benefits are delayed by two years ........................................................ Irrigation—18 ......
B. Consultative Process Issues raised will continue to be by a Stakeholders’ Committee consisting

addressed through an ongoing of eight to twelve individuals who
The GOA based its Program proposal consultative process that incorporates represent Water User Associations
on a comprehensive consultative feedback mechanisms reaching out to (‘‘WUAs’’), farmer groups, NGOs
process that was initiated in 2003 for stakeholders, particularly those involved in the PRSP and MCA
the development of its Poverty involved in irrigation, agriculture, rural consultative processes, and regional
Reduction Strategy Paper (‘‘PRSP’’). The road, policy development and advocacy, stakeholder committees. The
opportunity to apply for MCC funding and groups that specialize in monitoring Stakeholders’ Committee will also
led to further review and dissemination and evaluation. In order to provide an consult with the chairman of the Board
of the PRSP through electronic and Internet-based resource and information of Trustees on its views and
printed media. In the initial priority- portal, MCA-Armenia maintains an recommendations regarding the
setting stage, the GOA engaged a broad interactive website that provides up-to- performance and progress of the
cross-section of civil society—including date information on the Program, all Program, project and sub-project
rural community members, NGOs, and meeting minutes, a forum page on activities, components of the
the private sector—through public which to post and debate issues related Implementation Plan, procurement, and
meetings and regional roundtables to proposal development and financial management. The minutes of
focused specifically on MCA proposal implementation, and an e-mail address these meetings and discussions will be
development. The NGO community for sending inquiries and concerns. posted on the MCA-Armenia Web site.
contributed substantially to the proposal To ensure meaningful stakeholder
development and due diligence participation in Compact C. Government Commitment and

processes by electing its own implementation, the MCA-Armenia Effectiveness
representatives to participate in Governing Council will include five The GOA has exhibited a high degree
meetings of the inter-governmental voting representatives of civil society. of commitment to the Program, and will
board of trustees (‘‘Board of Trustees’’). These representatives will be appointed take the following measures to ensure
the effectiveness of the MCA E. Environmental and Social Impacts Millennium Challenge Compact
investment: Between the United States of America
The Program is unlikely to cause Acting Through the Millennium
• Adopting into legislation policies significant environmental, health, or
that will ensure the sustainability of the Challenge Corporation and the
safety hazards, and immitigable impacts Government of the Republic of Armenia
infrastructure investments, including on sensitive areas are not expected. The
user fee-based cost recovery Rural Road Rehabilitation Project is Table of Contents
mechanisms for irrigation systems and classified as a ‘‘Category B’’ according to Article I. Purpose and Term
assigning maintenance responsibilities Section 1.1 Objectives
MCC guidelines, requiring
of the lifeline network to the Armenian Section 1.2 Projects
environmental and social analyses due Section 1.3 Entry into Force; Compact
Road Directorate.
to potentially adverse site-specific Term
• Developing and implementing a environmental impacts. The Irrigated Article II. Funding and Resources
plan to restructure the Water Supply Agriculture Project is classified as a Section 2.1 MCC Funding
Agency and transferring certain ‘‘Category A,’’ requiring environmental Section 2.2 Government Resources
operations and maintenance and social impact assessments due to Section 2.3 Limitations on the Use or
responsibilities to developing Treatment of MCC Funding
potentially adverse environmental Section 2.4 Incorporation; Notice;
federations of WUAs. impacts resulting from the construction Clarification
• Identifying and contributing to of reservoirs, gravity schemes, and the Section 2.5 Refunds; Violation
financing for the rehabilitation of the Ararat Valley drainage scheme. A Article III. Implementation
rest of the lifeline network, in addition baseline study will be required for the Section 3.1 Implementation Framework
to the roads rehabilitated with MCC Ararat Valley drainage scheme prior to Section 3.2 Government Responsibilities
Section 3.3 Government Deliveries
funding. initiating the required environmental
Section 3.4 Government Assurances
• Meeting the co-financing and social impact assessment, and a Section 3.5 Implementation Letters;
requirements of the WUAs for tertiary land compensation framework may be Supplemental Agreements
canals consistent with the ongoing required for certain reservoirs. Section 3.6 Procurement; Awards of
World Bank Irrigation Development Environmental management plans will Assistance
be developed for both projects. The Section 3.7 Policy Performance; Policy
Project. Reforms
environmental benefits expected from
D. Sustainability Section 3.8 Records and Information;
the Irrigated Agriculture Project include Access; Audits; Reviews
reduced water losses through increased Section 3.9 Insurance
Currently, the GOA expends
efficiency, improved energy Section 3.10 Domestic Requirements
approximately $9 million per year for
conservation and more sustainable Section 3.11 No Conflict
routine maintenance on the entire road Section 3.12 Reports
agricultural practices. After reviewing
network. As rehabilitation of the lifeline Article IV. Conditions Precedent; Deliveries
an initial environmental assessment, the
network proceeds, the GOA will commit Section 4.1 Conditions Prior to the Entry
Armenian Ministry of Nature Protection
additional resources for future financing into Force and Deliveries
issued a positive evaluation of the
of routine maintenance on the lifeline Section 4.2 Conditions Precedent to MCC
overall Program, a prerequisite for Disbursements or Re-Disbursements
network. The Rural Road Rehabilitation
further environmental assessment and Article V. Final Clauses
Project will further help to
institutionalize performance-based project design. Section 5.1 Communications
Section 5.2 Representatives
contracts, which were instituted by the F. Donor Coordination Section 5.3 Amendments
Armenian Road Directorate in 2005. Section 5.4 Termination; Suspension
The Program builds upon an Section 5.5 Privileges and Immunities
The management of Armenia’s
irrigation network has recently been extensive body of work by several Section 5.6 Attachments
decentralized to 53 WUAs, and the GOA international donors, particularly the Section 5.7 Inconsistencies
World Bank, which produced much of Section 5.8 Indemnification
has enhanced water management Section 5.9 Headings
efficiency by merging responsibilities the research upon which the Program is
based. In transportation, the main Section 5.10 Interpretation; Definitions
for irrigation and drainage. The Irrigated Section 5.11 Signatures
Agriculture Project will benefit from an donors have been the World Bank and Section 5.12 Designation
extensive Water-to-Market Activity that the Lincy Foundation. The Rural Road Section 5.13 Survival
will provide technical and Rehabilitation Project complements the Section 5.14 Consultation
organizational support to ensure WUAs rehabilitation and construction of larger Section 5.15 MCC Status
and federations of WUAs have systems roads, and serves as a catalyst for Section 5.16 Language
contributions of future donors to the Section 5.17 Publicity; Information and
to effectively manage and finance their Marking
operations. In addition, credit completion of the lifeline network. In
Exhibit A: Definitions
organizations will receive training and irrigation, the main donors have been Exhibit B: List of Certain Supplemental
capital to expand financing the World Bank and the International Agreements
opportunities to WUA member farmers Fund for Agricultural Development. Schedule 2.1(a)(iii): Description of
and enterprises. The resulting transition Other significant donor projects include Compact Implementation Funding
to more profitable operations by the USDA Marketing Assistance Project, Annex I: Program Description
member farmers will enhance the the USAID Micro Enterprise Schedule 1 ‘‘ Rural Road Rehabilitation
Development Initiative, and the USAID Project
financial sustainability of the irrigation Schedule 2 ‘‘ Irrigated Agriculture Project
system, as will the replacement of Armenia Agribusiness Small and
Annex II: Financial Plan Summary

pumping systems with more energy- Medium Enterprise Market Annex III: Description of the M&E Plan
efficient gravity irrigation and the Development Project. The Irrigated
increased capacity of the WUAs to Agriculture Project will work closely Millennium Challenge Compact
finance themselves through member with and build on the contributions of This Millennium Challenge Compact
contributions. these donors. (the ‘‘Compact’’) is made between the
United States of America, acting performance of the agricultural sector in within the Projects shall be as generally
through the Millennium Challenge Armenia (the ‘‘Compact Goal’’). The described in Annex II or as otherwise
Corporation, a United States Parties have identified the following agreed upon by the Parties from time to
Government corporation (‘‘MCC’’), and project-level objectives (the time.
the Government of the Republic of ‘‘Objectives’’) to advance the Compact (ii) If at any time MCC determines that
Armenia (the ‘‘Government’’) (referred Goal, each of which is described in a condition precedent to an MCC
to herein individually as a ‘‘Party’’ and more detail in the Annexes attached Disbursement has not been satisfied,
collectively, the ‘‘Parties’’). A hereto: MCC may, upon written notice to the
compendium of capitalized terms Expand the access of rural Government, reduce the total amount of
defined herein is included in Exhibit A communities to agricultural markets, MCC Funding by an amount equal to the
attached hereto. non-farm income opportunities and amount estimated in the applicable
social infrastructure by improving the Detailed Financial Plan for the Program,
Recitals Project or Project Activity for which
condition of rural roads (the ‘‘Rural
Whereas, MCC, acting through its Road Rehabilitation Objective’’); and such condition precedent has not been
Board of Directors, has selected the Increase the productivity of the met. Upon the expiration or termination
Republic of Armenia as eligible to agricultural sector by extending and of this Compact, (1) any amounts of
present to MCC a proposal for the use improving the quality of the irrigation MCC Funding not disbursed by MCC to
of Millennium Challenge Account system, strengthening the entities that the Government shall be automatically
(‘‘MCA’’) assistance to help facilitate manage the system and enabling farmers released from any obligation in
poverty reduction through economic to commercialize their products (the connection with this Compact and (2)
growth in Armenia; ‘‘Irrigated Agriculture Objective’’). any amounts of MCC Funding disbursed
Whereas, the Government has carried The Government expects to achieve, by MCC to the Government as provided
out a consultative process with the and shall use its best efforts to ensure in Section 2.1(b)(i), but not re-disbursed
country’s private sector and civil society the achievement of, these Objectives as provided in Section 2.1(b)(ii) or
to outline the country’s priorities for the during the Compact Term. otherwise incurred as permitted
use of MCA assistance and developed a pursuant to Section 5.4(e) prior to the
proposal, which was submitted to MCC Section 1.2 Projects expiration or termination of this
on March 28, 2005 (the ‘‘Proposal’’); The Annexes attached hereto describe Compact, shall be returned to MCC in
Whereas, the Proposal focused on the specific projects and the policy accordance with Section 2.5(a)(ii).
increasing agricultural production in reforms and other activities related (iii) Notwithstanding any other
poor, rural areas of the country through thereto (each, a ‘‘Project’’) that the provision of this Compact and pursuant
investments in irrigation and rural Government will carry out, or cause to to the authority of section 609(g) of the
roads; be carried out, in furtherance of this Millennium Challenge Act of 2003, as
Whereas, MCC has evaluated the Compact to achieve the Objectives. amended (the ‘‘Act’’), upon the
Proposal and related documents to conclusion of this Compact (and
determine whether the Proposal is Section 1.3 Entry into Force; Compact without regard to the satisfaction of all
consistent with core MCA principles Term of the conditions for Entry into Force
and includes proposed activities and This Compact shall enter into force on required under Section 1.3), MCC shall
projects that will advance the progress the date of the last letter in an exchange make available Five Hundred Thousand
of Armenia towards achieving economic of letters between the Principal United States Dollars (USD $500,000)
growth and poverty reduction; Representatives of each Party (‘‘Compact Implementation Funding’’)
Whereas, based on MCC’s evaluation confirming that each Party has to facilitate certain aspects of Compact
of the Proposal and related documents completed its domestic requirements for implementation as described in
and subsequent discussions and entry into force of this Compact and that Schedule 2.1(a)(iii) attached hereto;
negotiations between the Parties, the all conditions set forth in Section 4.1 provided, such Compact
Government and MCC determined to have been satisfied by the Government Implementation Funding shall be
enter into this Compact to implement a and MCC (such date, the ‘‘Entry into subject to (1) the limitations on the use
program using MCC Funding to advance Force’’). This Compact shall remain in or treatment of MCC Funding set forth
force for five (5) years from the Entry in Section 2.3, as if such provision were
Armenia’s progress towards economic
into Force of this Compact, unless in full force and effect, and (2) any other
growth and poverty reduction (the
earlier terminated in accordance with requirements for, and limitations on the
‘‘Program’’); and
use of, such Compact Implementation
Whereas, the Government intends to Section 5.4 (the ‘‘Compact Term’’).
Funding as may be required by MCC in
establish a legal entity, in a form
Article II. Funding and Resources writing; provided, further, that any
mutually agreeable to the Parties, which
Compact Implementation Funding
shall be responsible for the oversight Section 2.1 MCC Funding
granted in accordance with this Section
and management of the implementation (a) MCC’s Contribution. MCC hereby 2.1(a)(iii) shall be included in, and not
of this Compact on behalf of the grants to the Government, subject to the additional to, the total amount of MCC
Government (‘‘MCA-Armenia’’). terms and conditions of this Compact, Funding; and provided, further, any
Now, Therefore, in consideration of an amount not to exceed Two Hundred obligation to provide such Compact
the foregoing and the mutual covenants Thirty-Five Million Six Hundred Fifty Implementation Funding shall expire
and agreements set forth herein, the Thousand United States Dollars (USD upon the expiration or termination of
Parties hereby agree as follows: $235,650,000) (‘‘MCC Funding’’) during this Compact or five (5) years from the
Article I. Purpose and Term the Compact Term to enable the conclusion of this Compact, whichever
Government to implement the Program occurs sooner. Notwithstanding

Section 1.1 Objectives and achieve the Objectives. anything to the contrary in this
The overall objective of this Compact (i) Subject to Sections 2.1(a)(ii), 2.2(b) Compact, this Section 2.1(a)(iii) shall
is to reduce rural poverty through a and 5.4, the allocation of MCC Funding provisionally apply prior to Entry into
sustainable increase in the economic within the Program and among and Force.
(b) Disbursements. Government through Implementation is fully reflected and accounted for in
(i) Disbursements of MCC Funding. Letters on the frequency, form and the annual budget of the Republic of
MCC shall from time to time make content of requests for MCC Armenia on a multi-year basis.
disbursements of MCC Funding (each Disbursements and Re-Disbursements or
such disbursement, an ‘‘MCC Section 2.3 Limitations on the Use or
any other matter relating to MCC
Disbursement’’) to a Permitted Account Treatment of MCC Funding
Funding. The Government shall apply
or through such other mechanism such guidance in implementing this (a) Abortions and Involuntary
agreed by the Parties under and in Compact. Sterilizations. The Government shall
accordance with the procedures and ensure that MCC Funding shall not be
requirements set forth in Annex I, the Section 2.2 Government Resources used to undertake, fund or otherwise
Disbursement Agreement or as (a) The Government shall provide or support any activity that is subject to
otherwise provided in any other cause to be provided such Government prohibitions on use of funds contained
relevant Supplemental Agreement. funds and other resources, and shall in (i) paragraphs (1) through (3) of
(ii) Re-Disbursements of MCC take or cause to be taken such actions, section 104(f) of the Foreign Assistance
Funding. The release of MCC Funding including obtaining all necessary Act of 1961 (22 U.S.C. 2151b(f)(1)–(3), a
from a Permitted Account (each such approvals and consents, as are specified United States statute, which
release, a ‘‘Re-Disbursement’’), shall be in this Compact or in any Supplemental prohibitions shall apply to the same
made in accordance with the procedures Agreement to which the Government is extent and in the same manner as such
and requirements set forth in Annex I, a party or as are otherwise necessary prohibitions apply to funds made
the Disbursement Agreement or as and appropriate to effectively carry out available to carry out Part I of such Act;
otherwise provided in any other the Government Responsibilities or or (ii) any provision of law comparable
relevant Supplemental Agreement. other responsibilities or obligations of to the eleventh and fourteenth provisos
(c) Interest. Unless the Parties agree the Government under or in furtherance under the heading ‘‘Child Survival and
otherwise in writing, any interest or of this Compact during the Compact Health Programs Fund’’ of division E of
other earnings on MCC Funding that Term and through the completion of any Public Law 108–7 (117 Stat. 162), a
accrue (collectively, ‘‘Accrued Interest’’) post-Compact Term activities, audits or United States statute.
shall be held in a Permitted Account other responsibilities. (b) United States Job Loss or
and accrue in accordance with the (b) If at any time during the Compact Displacement of Production. The
requirements for the accrual and Term, the Government materially Government shall ensure that MCC
treatment of Accrued Interest as reallocates or reduces the allocation in Funding shall not be used to undertake,
specified in Annex I or any relevant its national budget or any other fund or otherwise support any activity
Supplemental Agreement. On a Armenian governmental authority at a that is likely to cause a substantial loss
quarterly basis and upon the departmental, municipal, regional or of United States jobs or a substantial
termination or expiration of this other jurisdictional level materially displacement of United States
Compact, the Government shall return, reallocates or reduces the allocation of production, including:
or ensure the return of, all Accrued its respective budget, of the normal and (i) Providing financial incentives to
Interest to any United States expected resources that the Government relocate a substantial number of United
Government account designated by or such other governmental authority, as States jobs or cause a substantial
MCC. applicable, would have otherwise displacement of production outside the
(d) Conversion; Exchange Rate. The received or budgeted, from external or United States;
Government shall ensure that all MCC domestic sources, for the activities (ii) Supporting investment promotion
Funding that is held in the Permitted contemplated herein, the Government missions or other travel to the United
Account(s) shall be denominated in the shall notify MCC in writing within States with the intention of inducing
currency of the United States of fifteen (15) days of such reallocation or United States firms to relocate a
America (‘‘United States Dollars’’) prior reduction, such notification to contain substantial number of United States jobs
to Re-Disbursement; provided, that a information regarding the amount of the or a substantial amount of production
certain portion of MCC Funding may be reallocation or reduction, the affected outside the United States;
transferred to a Local Account and may activities, and an explanation for the (iii) Conducting feasibility studies,
be held in such Local Account in the reduction. In the event that MCC research services, studies, travel to or
currency of the Republic of Armenia independently determines upon review from the United States, or providing
prior to Re-Disbursement in accordance of the executed national annual budget insurance or technical and management
with the requirements of Annex I and that such a material reallocation or assistance, with the intention of
any relevant Supplemental Agreement. reduction of resources has occurred, inducing United States firms to relocate
To the extent that any amount of MCC MCC shall notify the Government and, a substantial number of United States
Funding held in United States Dollars following such notification, the jobs or cause a substantial displacement
must be converted into the currency of Government shall provide a written of production outside the United States;
the Republic of Armenia for any explanation for such reallocation or (iv) Advertising in the United States
purpose, including for any Re- reduction and MCC may (i) reduce, in to encourage United States firms to
Disbursement or any transfer of MCC its sole discretion, the total amount of relocate a substantial number of United
Funding into a Local Account, the MCC Funding or any MCC States jobs or cause a substantial
Government shall ensure that such Disbursement by an amount equal to the displacement of production outside the
amount is converted consistent with amount estimated in the applicable United States;
Annex I, including the rate and manner Detailed Financial Plan for the activity (v) Training workers for firms that
set forth in Annex I, and the for which funds were reduced or intend to relocate a substantial number
requirements of the Disbursement reallocated or (ii) otherwise suspend or of United States jobs or cause a
Agreement or any other Supplemental terminate MCC Funding in accordance substantial displacement of production
Agreement between the Parties. with Section 5.4(b). outside the United States;
(e) Guidance. From time to time, MCC (c) The Government shall use its best (vi) Supporting a United States office
may provide guidance to the efforts to ensure that all MCC Funding of an organization that offers incentives
for United States firms to relocate a or deposit requirements and currency due to the impracticality of
substantial number of United States jobs controls in the Republic of Armenia, or implementation of this provision with
or cause a substantial displacement of any other tax, duty, charge or fee of respect to certain types or amounts of
production outside the United States; or whatever nature, except fees for specific taxes, or otherwise, the Government
(vii) Providing general budget support services rendered; for purposes of this shall refund promptly to MCC to an
for an organization that engages in any Section 2.3(e), the term ‘‘national’’ refers account designated by MCC the amount
activity prohibited above. to organizations established under the of such Tax in the currency of the
(c) Military Assistance and Training. laws of the Republic of Armenia, other Republic of Armenia, within thirty (30)
The Government shall ensure that MCC than MCA-Armenia or any other entity days (or such other period as may be
Funding shall not be used to undertake, established solely for purposes of agreed in writing by the Parties) after
fund or otherwise support the purchase managing or overseeing the the Government is notified in writing
or use of goods or services for military implementation of the Program or any according to procedures agreed by the
purposes, including military training, or wholly-owned subsidiaries, divisions, Parties, whether by MCC or otherwise,
to provide any assistance to the military, or Affiliates of entities not registered or of such levy and tax payment; provided,
police, militia, national guard or other established under the laws of the however, the Government shall apply
quasi-military organization or unit. Republic of Armenia; national funds to satisfy its obligations
(d) Prohibition of Assistance Relating (2) Customs duties, tariffs, import and under this Section 2.3(e)(iii) and no
to Environmental, Health or Safety export taxes, or other levies on the MCC Funding, Accrued Interest, or any
Hazards. The Government shall ensure importation, use and re-exportation of assets, goods, or property (real, tangible,
that MCC Funding shall not be used to goods, services, or the personal or intangible) purchased or financed in
undertake, fund or otherwise support belongings and effects, including whole or in part (directly or indirectly)
any activity that is likely to cause a personally-owned automobiles, for by MCC Funding (‘‘Program Assets’’)
significant environmental, health, or Program use or the personal use of may be applied by the Government in
safety hazard. Unless MCC and the individuals who are neither citizens nor satisfaction of its obligations under this
Government agree otherwise in writing, permanent residents of the Republic of paragraph.
the Government shall ensure that Armenia and who are present in the (iv) The Parties shall memorialize in
activities undertaken, funded or Republic of Armenia for purposes of a mutually acceptable Supplemental
otherwise supported in whole or in part carrying out the Program or their family Agreement or Implementation Letter or
(directly or indirectly) by MCC Funding members, including all charges based on other suitable document the
comply with environmental guidelines the value of such imported goods; mechanisms for implementing this
delivered by MCC to the Government or (3) Taxes on the income or personal Section 2.3(e), including (1) a formula
posted by MCC on its Web site or property of all individuals who are for determining refunds for Taxes paid,
otherwise publicly made available, as neither citizens nor permanent residents the amount of which is not susceptible
such guidelines may be amended from of the Republic of Armenia, including to precise determination, (2) a
time to time (the ‘‘Environmental income and social security taxes of all mechanism for ensuring the tax-free
Guidelines’’), including any definition types and all taxes on the personal importation, use, and re-exportation of
of ‘‘likely to cause a significant property owned by such individuals, to goods, services, or the personal
environmental, health, or safety hazard’’ the extent such income or property are belongings of individuals (including all
as may be set forth in such attributable to MCC Funding; and Providers) described in paragraph (i)(2)
Environmental Guidelines. (4) Taxes or duties levied on the of this Section 2.3(e), and (3) any other
(e) Taxation. purchase of goods or services funded by appropriate Government action to
(i) Taxes. The Government shall MCC Funding, including sales taxes, facilitate the administration of this
ensure that the Program, all Program tourism taxes, value-added taxes Section 2.3(e).
Assets, MCC Funding and Accrued (‘‘VAT’’), or other similar charges. (v) The Parties agree that this Section
Interest shall be free from any taxes (ii) This Section 2.3(e) shall apply, but 2.3(e) shall supplement, without
imposed under laws currently or is not limited to (1) any transaction, limiting in any manner, the provisions
hereafter in effect in the Republic of service, activity, contract, grant or other relating to tariffs, dues, customs duties,
Armenia during the Compact Term. implementing agreement funded in import taxes and other similar taxes or
This exemption shall apply to any use whole or in part by MCC Funding; (2) charges contained in the bilateral
of any Program Asset, MCC Funding any supplies, equipment, materials, agreement entered into on December 12,
and Accrued Interest, including any property or other goods (referred to 1992 between the Government of the
Exempt Uses, and to any work herein collectively as ‘‘goods’’) or funds United States of America and the
performed under or activities introduced into, acquired in, used or Government of the Republic of Armenia
undertaken in furtherance of this disposed of in, or imported into or Regarding Cooperation to Facilitate the
Compact by any person or entity exported from, the Republic of Armenia Provision of Humanitarian and
(including contractors and grantees) by MCC, or by any person or entity Technical Economic Assistance (the
funded by MCC Funding, and shall (including contractors and grantees) as ‘‘Bilateral Agreement’’), which
apply to all taxes, tariffs, duties, and part of, or in conjunction with, MCC agreement continues in full force and
other levies (each a ‘‘Tax’’ and Funding or the Program; (3) any effect. In case of any inconsistency
collectively, ‘‘Taxes’’), including: contractor, grantee, or other between the provisions of this Section
(1) To the extent attributable to MCC organization carrying out activities 2.3(e) and the provisions relating to
Funding, income taxes and other taxes funded in whole or in part by MCC tariffs, dues, customs duties, import
on profit or businesses imposed on Funding; and (4) any employee of such taxes and other similar taxes or charges
organizations or entities, other than organizations (the uses set forth in contained in the Bilateral Agreement,
nationals of the Republic of Armenia, clauses (1) through (4) are collectively the provisions of this Section 2.3(e)
receiving MCC Funding, including taxes referred to herein as ‘‘Exempt Uses’’). shall prevail.
on the acquisition, ownership, rental, (iii) If a Tax has been levied and paid (f) Alteration. The Government shall
disposition or other use of real or contrary to the requirements of this ensure that no MCC Funding, Accrued
personal property, taxes on investment Section 2.3(e), whether inadvertently, Interest or Program Assets shall be
subject to any impoundment, rescission, Supplemental Agreement is agreed in writing by the Parties) after
sequestration or any provision of law implemented in violation of the the Government is notified, whether by
now or hereafter in effect in the prohibitions set forth in Section 2.3. MCC or otherwise, of such prohibited
Republic of Armenia that would have (b) The Government shall ensure use; provided, however, the Government
the effect of requiring or allowing any notification of all of the requirements shall apply national funds to satisfy its
impoundment, rescission or set forth in Section 2.3 to any Provider obligations under this Section 2.5(a)(i)
sequestration of any MCC Funding, and all relevant officers, directors, and no MCC Funding, Accrued Interest
Accrued Interest or Program Asset. employees, agents, representatives, or Program Assets may be applied by
(g) Liens or Encumbrances. The Affiliates, contractors, sub-contractors, the Government in satisfaction of its
Government shall ensure that no MCC grantees and sub-grantees of any obligations under this Section 2.5(a)(i);
Funding, Accrued Interest or Program Provider. The term ‘‘Provider’’ shall and
Assets shall be subject to any lien, mean (i) MCA-Armenia and any (ii) If all or any portion of this
attachment, enforcement of judgment, Government Affiliate or Permitted Compact is terminated or suspended
pledge, or encumbrance of any kind Designee involved in any activities in and upon the expiration of this
(each a ‘‘Lien’’), except with the prior furtherance of this Compact or (ii) any Compact, the Government shall, subject
approval of MCC in accordance with third party who receives at least USD to the requirements of Sections 5.4(e)
Section 3(c) of Annex I, and in the event $50,000 in the aggregate of MCC and 5.4(f), refund, or ensure the refund,
of the imposition of any Lien not so Funding (other than employees of MCA- to MCC to such account(s) designated by
approved, the Government shall Armenia) during the Compact Term or MCC the amount of any MCC Funding,
promptly seek the release of such Lien; such other amount as the Parties may plus any Accrued Interest, promptly,
provided, however, the Government agree in writing, whether directly from but in no event later than thirty (30)
shall satisfy its obligations under this MCC, indirectly through Re- days after the Government receives
Section 2.3(g) at its own expense and no Disbursements, or otherwise. MCC’s request for such refund;
MCC Funding, Accrued Interest or (c) In the event the Government or provided, that if this Compact is
Program Assets may be applied by the any Provider requires clarification from terminated or suspended in part, MCC
Government in satisfaction of its MCC as to whether an activity may request a refund for only the
obligations under this Section 2.3(g). contemplated to be undertaken in amount of MCC Funding, plus any
(h) Other Limitations. The furtherance of this Compact violates or Accrued Interest, then allocated to the
Government shall ensure that the use or may violate any provision of Section terminated or suspended portion;
treatment of MCC Funding, Accrued 2.3, the Government shall notify, or provided, further, that any refund of
Interest and Program Assets shall be ensure that such Provider notifies, MCC MCC Funding or Accrued Interest shall
subject to such other limitations (i) as in writing and provide in such be to such account(s) as designated by
required by the applicable law of the notification a detailed description of the MCC.
United States of America now or activity in question. In such event, the (b) Notwithstanding any other
hereafter in effect during the Compact Government shall not proceed, and shall provision in this Compact or any other
Term, (ii) as advisable under or required use its best efforts to ensure that no agreement to the contrary, MCC’s right
by applicable United States Government relevant Provider proceeds, with such
under this Section 2.5 for a refund shall
policies now or hereafter in effect activity, and the Government shall
continue during the Compact Term and
during the Compact Term, or (iii) to ensure that no Re-Disbursements shall
for a period of (i) five (5) years thereafter
which the Parties may otherwise agree be made for such activity, until MCC
or (ii) one (1) year after MCC receives
in writing. advises the Government or such
actual knowledge of such violation,
(i) Utilization of Goods, Services and Provider in writing that the activity is
whichever is later.
Works. The Government shall ensure permissible.
(c) If MCC determines that any
that any Program Assets, services,
Section 2.5 Refunds; Violation activity or failure to act violates, or may
facilities or works funded in whole or in
(a) Notwithstanding the availability to violate, any Section in this Article II,
part (directly or indirectly) by MCC
MCC, or exercise by MCC of, any other MCC may refuse any further MCC
Funding, unless otherwise agreed by the
remedies, including under international Disbursements for or conditioned upon
Parties in writing, shall be used solely
law, this Compact, or any Supplemental such activity, and may take any action
in furtherance of this Compact.
Agreement: to prevent any Re-Disbursement related
(j) Notification of Applicable Laws
(i) If any amount of MCC Funding or to such activity.
and Policies. MCC shall notify the
Government of any applicable United Accrued Interest, or any Program Asset, Article III. Implementation
States law or policy affecting the use or is used for any purpose prohibited
under this Article II or otherwise in Section 3.1 Implementation
treatment of MCC Funding, whether or
violation of any of the terms and Framework
not specifically identified in this
Section 2.3, and shall provide to the conditions of this Compact, any This Compact shall be implemented
Government a copy of the text of any guidance in any Implementation Letter, by the Parties in accordance with this
such applicable law and a written or any Supplemental Agreement Article III and as further specified in the
explanation of any such applicable between the Parties, MCC may require Annexes and in relevant Supplemental
policy. the Government to repay promptly to Agreements.
MCC to an account designated by MCC
Section 2.4 Incorporation; Notice; or to others as MCC may direct the Section 3.2 Government
Clarification amount of such misused MCC Funding Responsibilities
(a) The Government shall include, or or Accrued Interest, or the cash (a) The Government shall have
ensure the inclusion of, all of the equivalent of the value of any misused principal responsibility for oversight
requirements set forth in Section 2.3 in Program Asset, in United States Dollars, and management of the implementation
all Supplemental Agreements to which plus any interest that accrued or would of the Program (i) in accordance with
MCC is not a party and shall use its best have accrued thereon, within thirty (30) the terms and conditions specified in
efforts to ensure that no such days (or such other period as may be this Compact and relevant
Supplemental Agreements, (ii) in herein or with the prior written consent influenced or rescinded by any
accordance with all applicable laws of MCC; provided, however, the governmental authority, except by a
then in effect in the Republic of Government may designate MCA- non-appealable judicial decision or any
Armenia, and (iii) in a timely and cost- Armenia or, with the prior written judicial decision which MCA-Armenia,
effective manner and in conformity with consent of MCC, such other mutually with the agreement of MCC, decides not
sound technical, financial and acceptable persons or entities, to to appeal, and (ii) the authority of MCA-
management practices (collectively, the implement some or all of the Armenia shall not be expanded,
‘‘Government Responsibilities’’). Unless Government Responsibilities or any restricted, or otherwise modified, except
otherwise expressly provided, any other responsibilities or obligations of in accordance with this Compact, the
reference to the Government the Government or to exercise any rights Governance Agreement or any other
Responsibilities or any other of the Government under this Compact Supplemental Agreement between the
responsibilities or obligations of the or any Supplemental Agreement Parties.
Government herein shall be deemed to between the Parties (referred to herein (f) The Government shall ensure that
apply to any Government Affiliate and collectively as ‘‘Designated Rights and all persons and individuals that enter
any of their respective directors, Responsibilities’’), in accordance with into agreements to provide goods,
officers, employees, contractors, sub- the terms and conditions set forth in services or works under the Program or
contractors, grantees, sub-grantees, this Compact or such Supplemental in furtherance of this Compact shall do
agents or representatives. Agreement (each, a ‘‘Permitted so in accordance with the Procurement
(b) The Government shall ensure that Designee’’). Notwithstanding any Guidelines and shall obtain all
no person or entity shall participate in provision herein or any other agreement necessary immigration, business and
the selection, award, administration or to the contrary, no such designation other permits, licenses, consents and
oversight of a contract, grant or other shall relieve the Government of such approvals to enable them and their
benefit or transaction funded in whole Designated Rights and Responsibilities, personnel to fully perform under such
or in part (directly or indirectly) by for which the Government shall retain agreements.
MCC Funding, in which (i) the entity, ultimate responsibility. In the event that
the person, members of the person’s Section 3.3 Government Deliveries
the Government designates any person
immediate family or household or his or or entity, including any Government The Government shall proceed, and
her business partners, or organizations Affiliate, to implement any portion of cause others to proceed, in a timely
controlled by or substantially involving the Government Responsibilities or manner to deliver to MCC all
such person or entity, has or have a other responsibilities or obligations of Government deliveries required to be
financial or other interest or (ii) the the Government, or to exercise any delivered by the Government under this
person or entity is negotiating or has rights of the Government under this Compact or any Supplemental
any arrangement concerning prospective Compact or any Supplemental Agreement between the Parties, in form
employment, unless such person or Agreement between the Parties, in and substance as set forth in this
entity has first disclosed in writing to accordance with this Section 3.2(c), Compact or in any such Supplemental
the Government the conflict of interest then the Government shall (i) cause Agreement.
and, following such disclosure, the such person or entity to perform such Section 3.4 Government Assurances
Parties agree in writing to proceed Designated Rights and Responsibilities
notwithstanding such conflict. The in the same manner and to the full The Government hereby provides the
Government shall ensure that no person extent to which the Government is following assurances to MCC that as of
or entity involved in the selection, obligated to perform such Designated the date this Compact is signed:
award, administration, oversight or Rights and Responsibilities, (ii) ensure (a) The information contained in the
implementation of any contract, grant or that such person or entity does not Proposal and any agreement, report,
other benefit or transaction funded in assign, delegate, or contract (or statement, communication, document or
whole or in part (directly or indirectly) otherwise transfer) any of such otherwise delivered or otherwise
by MCC Funding shall solicit or accept Designated Rights and Responsibilities communicated to MCC by or on behalf
from or offer to a third party or seek or to any other person or entity and (iii) of the Government on or after the date
be promised (directly or indirectly) for cause such person or entity to certify to of the submission of the Proposal (i) are
itself or for another person or entity any MCC in writing that it will so perform true, correct and complete in all
gift, gratuity, favor or benefit, other than such Designated Rights and material respects and (ii) do not omit
items of de minimis value and Responsibilities and will not assign, any fact known to the Government that
otherwise consistent with such delegate, or contract (or otherwise if disclosed would (1) alter in any
guidance as MCC may provide from transfer) any of such Designated Rights material respect the information
time to time. and Responsibilities to any person or delivered, (2) likely have a material
(c) The Government shall not entity without the prior written consent adverse effect on the Government’s
designate any person or entity, of MCC. ability to effectively implement, or
including any Government Affiliate, to (d) The Government shall, upon a ensure the effective implementation of,
implement, in whole or in part, this request from MCC, execute, or ensure the Program or any Project or to
Compact or any Supplemental the execution of, an assignment to MCC otherwise carry out its responsibilities
Agreement between the Parties of any cause of action which may accrue or obligations under or in furtherance of
(including any Government to the benefit of the Government, a this Compact, or (3) have likely
Responsibilities or any other Government Affiliate or any Permitted adversely affected MCC’s determination
responsibilities or obligations of the Designee, including MCA-Armenia, in to enter into this Compact or any
Government under this Compact or any connection with or arising out of any Supplemental Agreement between the
Supplemental Agreement between the activities funded in whole or in part Parties;

Parties) or to exercise any rights of the (directly or indirectly) by MCC Funding. (b) Unless otherwise disclosed in
Government under this Compact or any (e) The Government shall ensure that writing to MCC, the MCC Funding made
Supplemental Agreement between the (i) no decision of MCA-Armenia is available hereunder is in addition to the
Parties, except as expressly provided modified, supplemented, unduly normal and expected resources that the
Government usually receives or budgets Procurement Guidelines shall include Armenia no later than the time specified
for the activities contemplated herein the following requirements: in the Disbursement Agreement.
from external or domestic sources; (i) Internationally accepted (f) The Government shall include, or
(c) This Compact does not conflict procurement rules with open, fair and ensure the inclusion of, the
and will not conflict with any competitive procedures are used in a requirements of this Section 3.6 into all
international agreement or obligation to transparent manner to solicit, award and Supplemental Agreements between the
which the Government is a party or by administer contracts, grants, and other Government or any Government
which it is bound; and agreements and to procure goods, Affiliate or Permitted Designee or any of
(d) No payments have been (i) services and works; their respective directors, officers,
received by any official of the (ii) Solicitations for goods, services, employees, Affiliates, contractors, sub-
Government or any other government and works shall be based upon a clear contractors, grantees, sub-grantees,
body in connection with the and accurate description of the goods, representatives or agents, on the one
procurement of goods, services or works services or works to be acquired; hand, and a Provider, on the other hand.
to be undertaken or funded in whole or (iii) Contracts shall be awarded only (g) The Government shall ensure that
in part (directly or indirectly) by MCC to qualified and capable contractors that approvals of the procurement of goods,
Funding, except fees, taxes, or similar have the capability and willingness to works and services in furtherance of this
payments legally established in the perform the contracts in accordance Compact by the Governing Council
Republic of Armenia or (ii) made to any with the terms and conditions of the pursuant to the terms of the
third party, in connection with or in applicable contracts and on a cost Procurement Agreement shall not be
furtherance of this Compact, in violation effective and timely basis; and subject to any additional approval by
of the United States Foreign Corrupt (iv) No more than a commercially the Government.
Practices Act of 1977, as amended (15 reasonable price, as determined, for
example, by a comparison of price Section 3.7 Policy Performance; Policy
U.S.C. 78a et seq.).
quotations and market prices, shall be Reforms
Section 3.5 Implementation Letters; paid to procure goods, services, and In addition to the specific policy and
Supplemental Agreements works. legal reform commitments identified in
(a) MCC may, from time to time, issue (b) The Government shall maintain, Annex I and the Schedules thereto, the
one or more letters to furnish additional and shall use its best efforts to ensure Government shall seek to maintain and
information or guidance to assist the that all Providers maintain, records improve its level of performance under
Government in the implementation of regarding the receipt and use of goods, the policy criteria identified in section
this Compact (each, an ‘‘Implementation services and works acquired in 607 of the Act, and the MCA selection
Letter’’). The Government shall apply furtherance of this Compact, the nature criteria and methodology published by
such guidance in implementing this and extent of solicitations of prospective MCC pursuant to section 607 of the Act
Compact. suppliers of goods, services and works from time to time (‘‘MCA Eligibility
(b) The details of any funding, acquired in furtherance of this Compact, Criteria’’).
implementing and other arrangements and the basis of award of contracts,
in furtherance of this Compact may be Section 3.8 Records and Information;
grants and other agreements in
memorialized in one or more Access; Audits; Reviews
furtherance of this Compact.
agreements between (i) the Government (c) The Government shall use its best (a) Reports and Information. The
(or any Government Affiliate or efforts to ensure that information, Government shall furnish to MCC, and
Permitted Designee) and MCC, (ii) MCC including solicitations, regarding shall use its best efforts to ensure that
and/or the Government (or any procurement, grant and other agreement all Providers and any other third party
Government Affiliate or Permitted actions funded (or to be funded) in receiving MCC Funding, as appropriate,
Designee) and any third party, including whole or in part (directly or indirectly) furnish to the Government (and the
any of the Providers or Permitted by MCC Funding shall be made publicly Government shall provide to MCC), any
Designee or (iii) any third parties where available in the manner outlined in the records and other information required
neither MCC nor the Government is a Procurement Guidelines or in any other to be maintained under this Section 3.8
party, before, on or after the Entry into manner agreed upon by the Parties in and such other information, documents
Force (each, a ‘‘Supplemental writing. and reports as may be necessary or
Agreement’’). The Government shall (d) The Government shall ensure that appropriate for the Government to
deliver, or cause to be delivered, to MCC no goods, services or works funded in effectively carry out its obligations
within five (5) days of its execution a whole or in part (directly or indirectly) under this Compact, including under
copy of any Supplemental Agreement to by MCC Funding are procured pursuant Section 3.12.
which MCC is not a party. to orders or contracts firmly placed or (b) Government Books and Records.
entered into prior to the Entry into The Government shall maintain, and
Section 3.6 Procurement; Awards of Force, except as the Parties may shall use its best efforts to ensure that
Assistance otherwise agree in writing. all Providers maintain, accounting
(a) The Government shall ensure that (e) The Government shall ensure that books, records, documents and other
the procurement of all goods, services MCA-Armenia and any other Permitted evidence relating to this Compact
and works by the Government or any Designee follows, and uses its best adequate to show, to the satisfaction of
Provider in furtherance of this Compact efforts to ensure that all Providers MCC, without limitation, the use of all
shall be consistent with the follow, the Procurement Guidelines in MCC Funding, including all costs
procurement guidelines (the procuring (including soliciting) goods, incurred by the Government and the
‘‘Procurement Guidelines’’) reflected in services and works and in awarding and Providers in furtherance of this
a Supplemental Agreement between the administering contracts, grants and Compact, the receipt, acceptance and
Government (and/or a mutually other agreements in furtherance of this use of goods, services and works
acceptable Government Affiliate such as Compact, and shall furnish MCC acquired in furtherance of this Compact
MCA-Armenia) and MCC (the evidence of the adoption of the by the Government and the Providers,
‘‘Procurement Agreement’’), which Procurement Guidelines by MCA- agreed-upon cost sharing requirements,
the nature and extent of solicitations of representatives and agents of the substance as approved by MCA-
prospective suppliers of goods, services Government or any Provider. Armenia, the Government shall adopt,
and works acquired by the Government (d) Audits. or cause to be adopted, no later than
and the Providers in furtherance of this (i) Government Audits. The sixty (60) days prior to the end of the
Compact, the basis of award of Government shall, on at least an annual first anniversary of the Entry into Force
Government and other contracts and basis and as the Parties may otherwise of this Compact or prior to the end of
orders in furtherance of this Compact, agree in writing, conduct, or cause to be the first period to be audited.
the overall progress of the conducted, financial audits of all MCC (iv) Covered Provider. A ‘‘Covered
implementation of the Program, and any Disbursements and Re-Disbursements Provider’’ is (1) a non-United States
documents required by this Compact or during the year since the Entry into Provider that receives (other than
any Supplemental Agreement between Force or since the prior anniversary of pursuant to a direct contract or
the Parties or reasonably requested by the Entry into Force in accordance with agreement with MCC) USD $300,000 or
MCC upon reasonable notice (‘‘Compact the following terms, except as the more of MCC Funding in any MCA-
Records’’). The Government shall Parties may otherwise agree in writing. Armenia fiscal year or any other non-
maintain, and shall use its best efforts As requested by MCC in writing, the United States person or entity that
to ensure that all Covered Providers Government shall use, or cause to be receives (directly or indirectly) USD
maintain, Compact Records in used, or select, or cause to be selected, $300,000 or more of MCC Funding from
accordance with generally accepted an auditor named on the approved list any Provider in such fiscal year or (2)
accounting principles prevailing in the of auditors in accordance with the any United States Provider that receives
United States, or at the Government’s Guidelines for Financial Audits (other than pursuant to a direct contract
option and with the prior written Contracted by Foreign Recipients (the or agreement with MCC) USD $500,000
approval by MCC, other accounting ‘‘Audit Guidelines’’) issued by the or more of MCC Funding in any MCA-
principles, such as those (i) prescribed Inspector General (the ‘‘Inspector Armenia fiscal year or any other United
by the International Accounting General’’) of the United States Agency States person or entity that receives
Standards Committee (an affiliate of the for International Development (directly or indirectly) USD $500,000 or
International Federation of (‘‘USAID’’) and as approved by MCC, to more of MCC Funding from any
Accountants) or (ii) then prevailing in conduct such annual audits. Such Provider in such fiscal year.
the Republic of Armenia. Compact audits shall be performed in accordance
(v) Corrective Actions. The
Records shall be maintained for at least with such Audit Guidelines and be
Government shall use its best efforts to
five (5) years after the end of the subject to quality assurance oversight by
ensure that Covered Providers take,
Compact Term or for such longer the Inspector General in accordance
where necessary, appropriate and timely
with such Audit Guidelines. An audit
period, if any, required to resolve any corrective actions in response to audits,
shall be completed no later than 90 days
litigation, claims or audit findings or consider whether a Covered Provider’s
after the first anniversary of the Entry
any statutory requirements. audit necessitates adjustment of its own
into Force of this Compact and no later
(c) Access. Upon the request of MCC, than 90 days after each anniversary of records, and require each such Covered
the Government, at all reasonable times, the Entry into Force thereafter, or such Provider to permit independent auditors
shall permit, or cause to be permitted, other period as the Parties may to have access to its records and
authorized representatives of MCC, the otherwise agree in writing. financial statements as necessary.
Inspector General, the United States (ii) Audits of U.S. Entities. The (vi) Audit Reports. The Government
Government Accountability Office, any Government shall ensure that shall furnish, or use its best efforts to
auditor responsible for an audit Supplemental Agreements between the cause to be furnished, to MCC an audit
contemplated herein or otherwise Government or any Provider, on the one report in a form satisfactory to MCC for
conducted in furtherance of this hand, and a United States nonprofit each audit required by this Section 3.8,
Compact, and any agents or organization, on the other hand, state other than audits arranged for by MCC,
representatives engaged by MCC or a that the United States organization is no later than 90 days after the end of the
Permitted Designee to conduct any subject to the applicable audit period under audit, or such other time
assessment, review or evaluation of the requirements contained in OMB as may be agreed by the Parties from
Program, at all reasonable times the Circular A–133, notwithstanding any time to time.
opportunity to audit, review, evaluate or other provision of this Compact to the (vii) Other Providers. For Providers
inspect activities funded in whole or in contrary. The Government shall ensure who receive MCC Funding under this
part (directly or indirectly) by MCC that Supplemental Agreements between Compact pursuant to direct contracts or
Funding or undertaken in connection the Government or any Provider, on the agreements with MCC, MCC shall
with the Program, the utilization of one hand, and a United States for-profit include appropriate audit requirements
goods and services purchased or funded Covered Provider, on the other hand, in such contracts or agreements and
in whole or in part (directly or state that the United States organization shall, on behalf of the Government,
indirectly) by MCC Funding, and is subject to audit by the cognizant unless otherwise agreed by the Parties,
Compact Records, including of the United States Government agency, conduct the follow-up activities with
Government or any Provider, relating to unless the Government and MCC agree regard to the audit reports furnished
activities funded or undertaken in otherwise in writing. pursuant to such requirements.
furtherance of, or otherwise relating to, (iii) Audit Plan. The Government (viii) Audit by MCC. MCC retains the
this Compact, and shall use its best shall submit, or cause to be submitted, right to perform, or cause to be
efforts to ensure access by MCC, the to MCC, no later than twenty (20) days performed, the audits required under
Inspector General, the United States prior to the date of its adoption, in form this Section 3.8 by utilizing MCC
Government Accountability Office or and substance satisfactory to MCC, a Funding or other resources available to
relevant auditor, reviewer or evaluator plan, in accordance with the Audit MCC for this purpose, and to audit,
or their respective representatives or Guidelines, for the audit of the conduct a financial review, or otherwise
agents to all relevant directors, officers, expenditures of any Covered Providers, ensure accountability of any Provider or
employees, Affiliates, contractors, which audit plan, in the form and any other third party receiving MCC
Funding, regardless of the requirements such guarantee, including performance (i) A statement of whether the
of this Section 3.8. bonds. MCC and, to the extent it is not Program or any Project was solicited or
(e) Application to Providers. The named as the payee, MCA-Armenia unsolicited; and
Government shall include, or ensure the shall be named as additional insureds (ii) A detailed description of the
inclusion of, at a minimum, the on any such insurance or other objectives and measures for results of
requirements of: guarantee, to the extent permissible the Program or Project;
(i) Paragraphs (a), (b), (c), (d)(ii), under applicable laws. The Government (d) The progress made by the
(d)(iii), (d)(v), (d)(vi), and (d)(viii) of this shall ensure that any proceeds from Republic of Armenia toward achieving
Section 3.8 into all Supplemental claims paid under such insurance or the Compact Goal and Objectives;
Agreements between the Government, any other form of guarantee shall be (e) A description of the extent to
any Government Affiliate, any Permitted used to replace or repair any loss of which MCC Funding has been effective
Designee or any of their respective Program Assets or to pursue the in helping the Republic of Armenia to
directors, officers, employees, Affiliates, procurement of the covered goods, achieve the Compact Goal and
contractors, sub-contractors, grantees, services or works; provided, however, at Objectives;
sub-grantees, representatives or agents MCC’s election, such proceeds shall be (f) A description of the coordination
(each, a ‘‘Government Party’’), on the deposited in a Permitted Account as of MCC Funding with other United
one hand, and a Covered Provider that designated by MCA-Armenia and States foreign assistance and other
is not a non-profit organization acceptable to MCC or otherwise as related trade policies;
domiciled in the United States, on the directed by MCC. To the extent MCA- (g) A description of the coordination
other hand; Armenia is held liable under any of MCC Funding with assistance
(ii) Paragraphs (a), (b), (c), (d)(ii), and indemnification or other similar provided by other donor countries;
(d)(viii) of this Section 3.8 into all provision of any agreement between (h) Any report, document or filing
Supplemental Agreements between a MCA-Armenia, on the one hand, and that the Government, any Government
Government Party and a Provider that any other Provider or other third party, Affiliate or any Permitted Designee
does not meet the definition of a on the other hand, the Government shall submits to any government body in
Covered Provider; and pay in full on behalf of MCA-Armenia connection with this Compact;
(iii) Paragraphs (a), (b), (c), (d)(ii), any such obligation; provided, further, (i) Any report or document required
(d)(v) and (d)(viii) of this Section 3.8 the Government shall apply national to be delivered to MCC under the
into all Supplemental Agreements funds to satisfy its obligations under Environmental Guidelines, any Audit
between a Government Party and a this Section 3.9 and no MCC Funding, Plan, or any component of the
Covered Provider that is a non-profit Accrued Interest, or Program Asset may Implementation Plan; and
organization domiciled in the United be applied by the Government in (j) Any other report, document or
States. satisfaction of its obligations under this information requested by MCC or
(f) Reviews or Evaluations. The required by this Compact or any
Section 3.9.
Government shall conduct, or cause to Supplemental Agreement between the
be conducted, such performance Section 3.10 Domestic Requirements Parties.
reviews, data quality reviews,
The Government shall proceed in a Article IV. Conditions Precedent;
environmental and social audits, or
timely manner to seek any required Deliveries
program evaluations during the
ratification of this Compact or similar
Compact Term or otherwise and in Section 4.1 Conditions Prior to the
domestic requirement, which process
accordance with the M&E Plan or as Entry Into Force and Deliveries
the Government shall initiate promptly
otherwise agreed in writing by the
after the conclusion of this Compact. As conditions precedent to the Entry
Parties.
(g) Cost of Audits, Reviews or Notwithstanding anything to the into Force, the Parties shall satisfy the
Evaluations. MCC Funding may be used contrary in this Compact, this Section conditions set forth in this Section 4.1.
to fund the costs of any Audits, reviews 3.10 shall provisionally apply prior to (a) The Government (acting through a
or evaluations required under this the Entry into Force. mutually acceptable Government
Compact, including as reflected on Section 3.11 No Conflict Affiliate and/or MCA-Armenia) and
Exhibit A to Annex II, and in no event MCC shall execute a Disbursement
shall the Government be responsible for The Government shall undertake not Agreement, which agreement shall be in
the costs of any such Audits, reviews or to enter into any agreement in conflict full force and effect and, if required,
evaluations from financial sources other with this Compact or any Supplemental ratified in Armenia as of the Entry into
than MCC Funding. Agreement during the Compact Term. Force.
Section 3.12 Reports (b)(i) The Government (acting through
Section 3.9 Insurance a mutually acceptable Government
The Government shall, to MCC’s The Government shall provide, or Affiliate and/or MCA-Armenia) shall
satisfaction, insure or cause to be cause to be provided, to MCC at least on deliver one or more of the Supplemental
insured all Program Assets and shall each anniversary of the Entry into Force Agreements identified in Exhibit B
obtain or cause to be obtained such and otherwise within thirty (30) days of attached hereto, which agreements shall
other appropriate insurance and other any written request by MCC, or as be duly executed by the parties thereto
protections to cover against risks or otherwise agreed in writing by the and in full force and effect and, if
liabilities associated with the operations Parties, the following information: required, ratified in Armenia as of the
of the Program, including by requiring (a) The name of each entity to which Entry into Force, or (ii) the Government
Providers to obtain adequate insurance MCC Funding has been provided; (acting through a mutually acceptable
and post adequate performance bonds or (b) The amount of MCC Funding Government Affiliate and/or MCA-
other guarantees. MCA-Armenia or the provided to such entity; Armenia) and MCC execute one or more
Implementing Entity, as applicable, (c) A description of the Program and term sheets that set forth the material
shall be named as the payee on any such each Project funded in furtherance of and principal terms and conditions that
insurance and the beneficiary of any this Compact, including: will be included in any such
Supplemental Agreement that has not Article V. Final Clauses for all purposes other than signing
been entered into as of the Entry into amendments to this Compact. The
Section 5.1 Communications
Force (the ‘‘Supplemental Agreement names of the Principal Representative
Term Sheets’’). Unless otherwise expressly stated in and any Additional Representative of
this Compact or otherwise agreed in each of the Parties shall be provided,
(c) The Government (acting through a writing by the Parties, any notice,
mutually acceptable Government with specimen signatures, to the other
certificate, request, report, document or Party, and the Parties may accept as
Affiliate and/or MCA-Armenia) and other communication required,
MCC shall execute a Procurement duly authorized any instrument signed
permitted, or submitted by either Party by such representatives relating to the
Agreement, which agreement shall be in to the other under this Compact shall implementation of this Compact, until
full force and effect and, if required, be: (a) In writing; (b) in English; and (c) receipt of written notice of revocation of
ratified in Armenia as of the Entry into deemed duly given: (i) Upon personal their authority. A Party may change its
Force. delivery to the Party to be notified; (ii) Principal Representative to a new
(d) The Government shall deliver a when sent by confirmed facsimile or representative of equivalent or higher
written statement as to the incumbency electronic mail, if sent during normal rank upon written notice to the other
and specimen signature of the Principal business hours of the recipient Party, if Party, which notice shall include the
Representative and each Additional not, then on the next business day; or specimen signature of the new Principal
Representative executing any document (iii) two (2) business days after deposit Representative.
under this Compact, such written with an internationally recognized
statement to be signed by the Prime overnight courier, specifying next day Section 5.3 Amendments
Minister or a duly authorized official of delivery, with written verification of The Parties may amend this Compact
the Government other than the Principal receipt to the Party to be notified at the only by a written agreement signed by
Representative or any such Additional address indicated below, or at such the Principal Representatives of the
Representative. other address as such Party may Parties and subject to the respective
designate: domestic approval requirements to
(e) The Government shall deliver a To MCC: which this Compact was subject.
letter signed and dated by the Minister Millennium Challenge Corporation,
of Justice of the Government certifying: Attention: Vice President of Operations, Section 5.4 Termination; Suspension
(i) That the Government has (with a copy to the Vice President and (a) Subject to Section 2.5 and
completed all of its domestic General Counsel), 875 Fifteenth Street, paragraphs (e) through (h) of this
requirements for this Compact to be NW., Washington, DC 20005, United Section 5.4, either Party may terminate
fully enforceable under Armenian law; States of America, Facsimile: (202) 521– this Compact in its entirety by giving
and 3700, Phone: (202) 521–3600, E-mail: the other Party thirty (30) days’ written
(ii) That attached thereto are true, VPOperations@mcc.gov (Vice President notice.
of Operations); (b) Notwithstanding any other
correct and complete copies of any
VPGeneralCounsel@mcc.gov (Vice provision of this Compact, including
decree, legislation, regulation or other
President and General Counsel). Section 2.1, or any Supplemental
governmental document relating to its
To the Government: Agreement between the Parties, MCC
domestic requirements for this Compact
Ministry of Finance and Economy, may suspend or terminate this Compact
to enter into force, which MCC may post Attention: Minister of Finance and or MCC Funding, in whole or in part,
on its Web site or otherwise make Economy, 1, Melik-Adamyan Str., and any obligation or sub-obligation
publicly available. Yerevan 375010, Republic of Armenia, related thereto, upon giving the
(f) MCC shall deliver a letter signed Facsimile: +374 (10) 59–53–28, Phone: Government written notice, if MCC
and dated by the Principal +374 (10) 59–52–22 or 23, E-mail: determines, in its sole discretion that:
Representative of MCC certifying that minister@mfe.am. (i) Any use or proposed use of MCC
MCC has completed its domestic Notwithstanding the foregoing, any Funding or Program Assets or continued
requirements for this Compact to enter audit report delivered pursuant to implementation of the Compact would
into force. Section 3.8, if delivered by facsimile or be in violation of applicable law or
(g) MCC shall deliver a written electronic mail, shall be followed by an United States Government policy,
statement as to the incumbency and original in overnight express mail. This whether now or hereafter in effect;
specimen signature of the Principal Section 5.1 shall not apply to the (ii) The Government, any Provider, or
Representative and each Additional exchange of letters contemplated in any other third party receiving MCC
Representative executing any document Section 1.3 or any amendments under Funding or using Program Assets is
under this Compact, such written Section 5.3. engaged in activities that are contrary to
statement to be signed by a duly the national security interests of the
Section 5.2 Representatives
United States;
authorized officer of MCC other than the Unless otherwise agreed in writing by (iii) The Government or any Permitted
Principal Representative or any such the Parties, for all purposes relevant to Designee has committed an act or
Additional Representative. this Compact, the Government shall be omission or an event has occurred that
Section 4.2 Conditions Precedent to represented by the individual holding would render Armenia ineligible to
MCC Disbursements or Re- the position of, or acting as, Minister of receive United States economic
Disbursements Finance and Economy, and MCC shall assistance under Part I of the Foreign
be represented by the individual Assistance Act of 1961, as amended (22
Prior to, and as condition precedent holding the position of, or acting as, U.S.C. 2151 et seq.), by reason of the
to, any MCC Disbursement or Re- Vice President of Operations (each, a application of any provision of the
Disbursement, the Government shall ‘‘Principal Representative’’), each of Foreign Assistance Act of 1961 or any
satisfy, or ensure the satisfaction of, all whom, by written notice, may designate other provision of law;
applicable conditions precedent in the one or more additional representatives (iv) The Government or any Permitted
Disbursement Agreement. (each, an ‘‘Additional Representative’’) Designee has engaged in a pattern of
actions or omissions inconsistent with Agreement or to perform its obligations services (including certain
the MCA Eligibility Criteria, or there has under or in furtherance of this Compact administrative expenses) properly
occurred a significant decline in the or any Supplemental Agreement or to incurred within one hundred and
performance of the Republic of Armenia exercise its rights thereunder; (2) makes twenty (120) days after the expiration,
on one or more of the eligibility it improbable that the Objectives will be suspension or termination of the
indicators contained therein; achieved during the Compact Term; (3) Compact in connection with the
(v) The Government or any Provider materially and adversely affects the winding up of the Program may be paid
has materially breached one or more of Program Assets or any Permitted from MCC Funding, provided that in the
its assurances or any covenants, Account; or (4) constitutes misconduct case of clauses (i) and (ii) the request for
obligations or responsibilities under this injurious to MCC, or constitutes a fraud such payment is (1) properly submitted
Compact or any Supplemental or a felony, by the Government, any within ninety (90) days after the
Agreement; Government Affiliate, Permitted expiration, suspension or termination of
(vi) An audit, review, report or any Designee or Provider, or any officer, the Compact and (2) subject to the prior
other document or other evidence director, employee, agent, written consent of MCC.
reveals that actual expenditures for the representative, Affiliate, contractor, (f) Other than payments permitted
Program or any Project or any Project grantee, subcontractor or sub-grantee pursuant to Section 5.4(e), in the event
Activity were greater than the projected thereof; of the suspension or termination of this
expenditure for such activities (xi) The Government or any Permitted Compact or any Supplemental
identified in the applicable Detailed Designee or Provider has taken any Agreement, in whole or in part, each
Financial Plan or are projected to be action or omission or engaged in any Party, shall suspend, for the period of
greater than projected expenditures for activity in violation of, or inconsistent the suspension, or terminate, or ensure
such activities; with, the requirements of this Compact the suspension or termination of, as
(vii) If the Government (1) materially or any Supplemental Agreement to applicable, any obligation or sub-
reduces the allocation in its national which the Government or any Permitted obligation of the Parties to provide
budget or any other Government budget Designee or Provider is a party; financial or other resources under this
of the normal and expected resources (xii) There has occurred a failure to
Compact or any Supplemental
that the Government would have meet a condition precedent or series of
Agreement, or to the suspended or
otherwise received or budgeted, from conditions precedent or any other
external or domestic sources, for the terminated portion of this Compact or
requirements or conditions in
activities contemplated herein; (2) fails such Supplemental Agreement, as
connection with MCC Disbursement as
to contribute or provide the amount, applicable. In the event of such
set out in and in accordance with any
level, type and quality of resources suspension or termination, the
Supplemental Agreement between the
required to effectively carry out the Government shall use its best efforts to
Parties; or
Government Responsibilities or any (xiii) Any MCC Funding, Accrued suspend or terminate, or ensure the
other responsibilities or obligations of Interest or Program Asset becomes suspension or termination of, as
the Government under or in furtherance subject to a Lien without the prior applicable, all such noncancelable
of this Compact; or (3) fails to pay any approval of MCC, and the Government commitments related to the suspended
of its obligations as required under this fails to obtain the release of such Lien or terminated MCC Funding. Any
Compact or any Supplemental (at its own expense and not with MCC portion of this Compact or any such
Agreement, including such obligations Funding, Accrued Interest or Program Supplemental Agreement that is not
which shall be paid solely out of Assets) within 30 days after the suspended or terminated shall remain in
national funds; imposition of such Lien. full force and effect.
(viii) If the Government, any Provider, (c) MCC may reinstate any suspended (g) Upon the full or partial suspension
or any other third party receiving MCC or terminated MCC Funding under this or termination of this Compact or any
Funding or using Program Assets, or any Compact or any Supplemental MCC Funding, MCC may, at its expense,
of their respective directors, officers, Agreement if MCC determines, in its direct that title to Program Assets be
employees, Affiliates, contractors, sub- sole discretion, that the Government or transferred to MCC if such Program
contractors, grantees, sub-grantees, other relevant party has demonstrated a Assets are in a deliverable state;
representatives or agents, is found to commitment to correcting each provided, for any Program Asset(s)
have been convicted of a narcotics condition for which MCC Funding was partially purchased or funded (directly
offense or to have been engaged in drug suspended or terminated. or indirectly) by MCC Funding, the
trafficking; (d) The authority to suspend or Government shall reimburse to a United
(ix) Any MCC Funding or Program terminate this Compact or any MCC States Government account designated
Assets are applied (directly or Funding under this Section 5.4 includes by MCC the cash equivalent of the
indirectly) to the provision of resources the authority to suspend or terminate portion of the value of such Program
and support to, individuals and any obligations or sub-obligations Asset(s).
organizations associated with terrorism, relating to MCC Funding under any (h) Prior to the expiration of this
sex trafficking or prostitution; Supplemental Agreement without any Compact or upon the termination of this
(x) An event or condition of any liability to MCC whatsoever. Compact, the Parties shall consult in
character has occurred that: (1) (e) All MCC Disbursements and Re- good faith with a view to reaching an
Materially and adversely affects, or is Disbursements shall cease upon agreement in writing on (i) the post-
likely to materially and adversely affect, expiration, suspension, or termination Compact Term treatment of MCA-
the ability of the Government or any of this Compact; provided, however, (i) Armenia, (ii) the process for ensuring
other party to effectively implement, or reasonable expenditures for goods, the refunds of MCC Disbursements that
ensure the effective implementation of, services and works that are properly have not yet been released from a
the Program or any Project or to incurred under or in furtherance of this Permitted Account through a valid Re-
otherwise carry out its responsibilities Compact before expiration, suspension Disbursement nor otherwise committed
or obligations under or in furtherance of or termination of this Compact and (ii) in accordance with Section 5.4(e), or
this Compact or any Supplemental reasonable expenditures for goods and (iii) any other matter related to the
winding up of the Program and this Section 5.8 Indemnification this Compact, mean any branch, agency,
Compact. The Government shall indemnify and bureau, government corporation,
hold MCC and any MCC officer, government chartered entity or other
Section 5.5 Privileges and Immunities
director, employee, Affiliate, contractor, body of the Federal government of the
MCC is an agency of the Government agent or representative (each of MCC United States.
of the United States of America and its (e) The term ‘‘Affiliate’’ of a party is
and any such persons, an ‘‘MCC
personnel assigned to the Republic of a person or entity that controls, is
Indemnified Party’’) harmless from and
Armenia will be notified pursuant to the controlled by, or is under the same
against, and shall compensate,
Vienna Convention on Diplomatic control as the party in question, whether
reimburse and pay such MCC
Relations as members of the mission of by ownership or by voting, financial or
Indemnified Party for, any liability or
the Embassy of the United States of other power or means of influence.
other damages which (i) are (directly or (f) The term ‘‘Government Affiliate’’ is
America. The Government shall ensure indirectly) suffered or incurred by such
that any personnel of MCC, including an Affiliate, ministry, bureau,
MCC Indemnified Party, or to which any department, agency, government
individuals detailed to or contracted by MCC Indemnified Party may otherwise
MCC, and the members of the families corporation or any other entity
become subject, regardless of whether or chartered or established by the
of such personnel, while such personnel not such damages relate to any third-
are performing duties in the Republic of Government.
party claim, and (ii) arise from or as a (g) References to any Affiliate or
Armenia, shall enjoy the privileges and result of the negligence or willful
immunities that are enjoyed by a Government Affiliate herein shall
misconduct of the Government, any include any of their respective directors,
member of the United States Foreign Government Affiliate, MCA-Armenia or
Service, or the family of a member of the officers, employees, affiliates,
any Permitted Designee, (directly or contractors, sub-contractors, grantees,
United States Foreign Service, as indirectly) connected with, any
appropriate, of comparable rank and sub-grantees, representatives, and
activities (including acts or omissions) agents.
salary of such personnel, if such undertaken in furtherance of this
personnel or the members of the (h) Any references to ‘‘Supplemental
Compact; provided, however, the Agreement between the Parties’’ shall
families of such personnel are not a Government shall apply national funds
national of, or permanently resident in mean any agreement between MCC on
to satisfy its obligations under this the one hand, and the Government or
the Republic of Armenia. Section 5.8 and no MCC Funding, any Government Affiliate or Permitted
Section 5.6 Attachments Accrued Interest, or Program Asset may Designee on the other hand.
be applied by the Government in
Any annex, schedule, exhibit, table, satisfaction of its obligations under this Section 5.11 Signatures
appendix or other attachment expressly Section 5.8.
attached hereto (collectively, the Other than a signature to this
‘‘Attachments’’) is incorporated herein Section 5.9 Headings Compact or an amendment to this
by reference and shall constitute an Compact pursuant to Section 5.3, a
The Section and Subsection headings signature delivered by facsimile or
integral part of this Compact. used in this Compact are included for electronic mail in accordance with
Section 5.7 Inconsistencies convenience only and are not to be Section 5.1 shall be deemed an original
considered in construing or interpreting signature, and the Parties hereby waive
(a) Conflicts or inconsistencies this Compact.
between any parts of this Compact shall any objection to such signature or to the
be resolved by applying the following Section 5.10 Interpretation; Definitions validity of the underlying document,
descending order of precedence: certificate, notice, instrument or
(a) Any reference to the term agreement on the basis of the signature’s
(i) Articles I through V; and ‘‘including’’ in this Compact shall be legal effect, validity or enforceability
(ii) Any Attachments. deemed to mean ‘‘including without solely because it is in facsimile or
(b) In the event of any conflict or limitation’’ except as expressly provided electronic form. Such signature shall be
inconsistency between this Compact otherwise. accepted by the receiving Party as an
and any Supplemental Agreement (b) Any reference to activities original signature and shall be binding
between the Parties, the terms of this undertaken ‘‘in furtherance of this on the Party delivering such signature.
Compact shall prevail. In the event of Compact’’ or similar language shall
any conflict or inconsistency between include activities undertaken by the Section 5.12 Designation
any Supplemental Agreement between Government, any Government Affiliate, MCC may designate any Affiliate,
the Parties and any other Supplemental MCA-Armenia, any Permitted Designee, agent, or representative to implement, in
Agreement, the terms of the any Provider or any other third party whole or in part, its obligations, and
Supplemental Agreement between the receiving MCC Funding involved in exercise any of its rights, under this
Parties shall prevail. In the event of any carrying out the purposes of this Compact or any Supplemental
conflict or inconsistency between Compact or any Supplemental Agreement between the Parties.
Supplemental Agreements between any Agreement, including their respective
parties, the terms of a more recently directors, officers, employees, Affiliates, Section 5.13 Survival
executed Supplemental Agreement contractors, sub-contractors, grantees, Any Government Responsibilities,
between such parties shall take sub-grantees, representatives or agents, covenants, or obligations or other
precedence over a previously executed whether pursuant to the terms of this responsibilities to be performed by the
Supplemental Agreement between such Compact, any Supplemental Agreement Government after the Compact Term
parties. In the event of any or otherwise. shall survive the termination or
inconsistency between a Supplemental (c) References to ‘‘day’’ or ‘‘days’’ expiration of this Compact and expire in
Agreement between the Parties and any shall be calendar days unless provided accordance with their respective terms.
component of the Implementation Plan, otherwise. Notwithstanding the termination or
the terms of the relevant Supplemental (d) The term ‘‘United States expiration of this Compact, the
Agreement shall prevail. Government’’ shall, for the purposes of following provisions shall remain in
force: Sections 2.2, 2.3, 2.5, 3.2, 3.3, 3.4, including by posting this Compact, and by ownership or by voting, financial or
3.5, 3.8, 3.9 (for one year), 3.12, 5.1, 5.2, any amendments thereto, on the MCA- other power or means of influence.
5.4(d), 5.4(e) (for 120 days), 5.4(f), 5.4(g), Armenia Web site, identifying Program References to Affiliate herein shall
5.4(h), 5.5, 5.6, 5.7, 5.8, 5.9, 5.10, 5.11, activity sites, and marking Program include any of their respective directors,
5.12, this Section 5.13, 5.14, and 5.15. Assets; provided, any announcement, officers, employees, affiliates,
press release or statement regarding contractors, sub-contractors, grantees,
Section 5.14 Consultation
MCC or the fact that MCC is funding the sub-grantees, representatives, and
Either Party may, at any time, request Program or any other publicity materials agents.
consultations relating to the referencing MCC, including the AMD means Armenian Drams, the
interpretation or implementation of this publicity described in this Section 5.17, currency of the Republic of Armenia.
Compact or any Supplemental shall be subject to prior approval by Annex means any annex to this
Agreement between the Parties. Such MCC and shall be consistent with any Compact.
consultations shall begin at the earliest instructions provided by MCC from time ARD means the Armenian Road
possible date. The request for to time in relevant Implementation Directorate that manages the main and
consultations shall designate a Letters. Upon the termination or republican roads.
representative for the requesting Party expiration of this Compact, MCC may Attachments means any annex,
with the authority to enter consultations request the removal of, and the schedule, exhibit, table, appendix or
and the other Party shall endeavor to Government shall, upon such request, other attachment to this Compact.
designate a representative of equal or remove, or cause the removal of, any Audit Guidelines means the
comparable rank. If such representatives such markings and any references to ‘‘Guidelines for Financial Audits
are unable to resolve the matter within MCC in any publicity materials or on Contracted by Foreign Recipients’’
20 days from the commencement of the the MCA-Armenia Web site. issued by the Inspector General of the
consultations then each Party shall In Witness Whereof, the undersigned, United States Agency for International
forward the consultation to the duly authorized by their respective Development.
Principal Representative or such other governments, have signed this Compact Auditor means an auditor as defined
representative of comparable or higher this 27th day of March, 2006 and this in, and engaged pursuant to, Section
rank. The consultations shall last no Compact shall enter into force in 3(h) of Annex I and as required by
longer than 45 days from date of accordance with Section 1.3. Section 3.8(d) of the Compact.
commencement. If the matter is not Done at Washington, DC in the Auditor/Reviewer Agreement is an
resolved within such time period, either English language. agreement between MCA-Armenia and
Party may terminate this Compact For the United States of America, each Auditor or Reviewer, in form and
pursuant to Section 5.4(a). The Parties acting through the Millennium substance satisfactory to MCC, that sets
shall enter any such consultations Challenge Corporation, Name: John J. forth the roles and responsibilities of the
guided by the principle of achieving the Danilovich, Title: Chief Executive Auditor or Reviewer with respect to the
Compact Goal in a timely and cost- Officer. audit, review or evaluation, including
effective manner. For the Government of the Republic of access rights, required form and content
Armenia, Name: Vardan Khachatryan, of the applicable audit, review or
Section 5.15 MCC Status Title: Minister of Finance and Economy. evaluation and other appropriate terms
MCC is a United States government and conditions such as payment of the
corporation acting on behalf of the Exhibit A—Definitions Auditor or Reviewer.
United States Government in the The following compendium of Bank(s) means any bank holding a
implementation of this Compact. As capitalized terms that are used in this Permitted Account referenced in
such, MCC has no liability under this Compact is provided for the Section 4(d) of Annex I.
Compact, is immune from any action or convenience of the reader. To the extent Bank Agreement means an agreement
proceeding arising under or relating to that there is a conflict or inconsistency between MCA-Armenia and a Bank,
this Compact and the Government between the definitions in this Exhibit satisfactory to MCC, that sets forth the
hereby waives and releases all claims A and the definitions elsewhere in the signatory authority, access rights, anti-
related to any such liability. In matters text of this Compact, the definition money laundering and anti-terrorist
arising under or relating to this elsewhere in this Compact shall prevail financing provisions, and other terms
Compact, MCC is not subject to the over the definition in this Exhibit A. related to a Permitted Account.
jurisdiction of the courts or other body Defined terms importing the singular Beneficiaries means the intended
of the Republic of Armenia or any other also include the plural and vice versa. beneficiaries identified in accordance
jurisdiction. Accrued Interest is any interest or with Annex I.
other earnings on MCC Funding that Bilateral Agreement means the
Section 5.16 Language accrues as specified in Section 2.1(c). bilateral agreement entered into on
This Compact is prepared in English Act means the Millennium Challenge December 12, 1992 between the
and in the event of any ambiguity or Act of 2003, as amended. Government of the United States of
conflict between this official English Ad Hoc Evaluation shall have the America and the Government of the
version and any other version translated meaning set forth in Section 3(b) of Republic of Armenia Regarding
into any language for the convenience of Annex III. Cooperation to Facilitate the Provision
the Parties, this official English version Additional Representative is a of Humanitarian and Technical
shall prevail. representative as may be designated by Economic Assistance.
a Principal Representative, by written Chair means the Chair of the
Section 5.17 Publicity; Information notice, for all purposes other than Governing Council.
and Marking signing amendments to this Compact. Chief Executive Officer means the
The Government shall give Affiliate means the affiliate of a party, Chief Executive Officer of MCA-
appropriate publicity to this Compact as which is a person or entity that controls, Armenia.
a program to which the United States, is controlled by, or is under the same Civil Society Members are the five
through MCC, has contributed, control as the party in question, whether members of civil society appointed by
the Stakeholders’ Committee as of letters between the Principal conditions that govern MCA-Armenia
described in Section 3(d)(ii)(2)(A)(vii) of Representatives of each Party and as is further described in Section
Annex I, to serve as voting members on confirming that all conditions set forth 3(d)(i) of Annex I.
the Governing Council. in Section 4.1 have been satisfied by the Governing Council means an
Compact means the Millennium Government and MCC. independent governing council of MCA-
Challenge Compact made between the Environmental Guidelines means the Armenia to oversee MCA-Armenia’s
United States of America, acting environmental guidelines delivered by responsibilities and obligations under
through the Millennium Challenge MCC to the Government or posted by this Compact.
Corporation, and the Government of the MCC on its Web site or otherwise Governing Documents shall have the
Republic of Armenia. publicly made available, as such meaning set forth in Section 3(c)(i)(10)
Compact Goal means reducing rural guidelines may be amended from time of Annex I.
poverty through a sustainable increase to time. Government means the Government of
in the economic performance of the Environmental Observer is a the Republic of Armenia.
agricultural sector in Armenia. representative of an environmentally Government Affiliate is an Affiliate,
Compact Goal Indicator(s) means the focused NGO appointed by the ministry, bureau, department, agency,
Indicators in the M&E Plan that will Stakeholders’ Committee to serve as an government corporation or any other
measure the results for the overall Observer on the Governing Council. entity chartered or established by the
Program. A table of Compact Goal ESI Officer means the Environmental Government. References to Government
Indicators with their definitions is set and Social Impact Officer within the Affiliate shall include any of their
forth at Section 2(a)(i) of Annex III. Management Unit of MCA-Armenia who respective directors, officers, employees,
Compact Implementation Funding will ensure that environmental and affiliates, contractors, sub-contractors,
shall have the meaning set forth in social mitigation measures are followed grantees, sub-grantees, representatives,
Section 2.1(a)(iii). for all Project Activities in accordance and agents.
Compact Records shall have the with the provisions set forth in this Government Members are the
meaning set forth in Section 3.8(b). Compact and in relevant Supplemental government members identified in
Compact Reports means any Agreements. Section 3(d)(ii)(2)(A)(i–vi) of Annex I
documents or reports delivered to MCC ESIAs means environmental and serving as voting members on the
in satisfaction of the Government’s social impact assessments. Governing Council, and any
reporting requirements under this Evaluation Component means the replacements thereof in accordance with
Compact or any Supplemental component of the M&E Plan that Section 3(d)(ii)(2)(A) of Annex I.
Agreement between the Parties. specifies a methodology, process and Government Party means the
Compact Term means the term for timeline for the evaluation of planned, Government, any Government Affiliate,
which this Compact shall remain in ongoing, or completed Projects and any Permitted Designee or any of their
force, which shall be the five (5) year Project Activities to determine their respective directors, officers, employees,
period from the Entry into Force, unless efficiency, effectiveness, impact and Affiliates, contractors, sub-contractors,
earlier terminated in accordance with sustainability. grantees, sub-grantees, representatives
Section 5.4. Exempt Uses shall have the meaning or agents.
Covered Provider shall have the set forth in Section 2.3(e)(ii). Government Responsibilities shall
meaning set forth in Section 3.8(d)(iv). Final Evaluation shall have the have the meaning set forth in Section
Designated Rights and meaning set forth in Section 3(a) of 3.2(a).
Responsibilities shall have the meaning Annex III. HVA means high value added.
set forth in Section 3.2(c). Financial Plan means collectively, the IDP means the Irrigation Development
Detailed Financial Plan means the Multi-Year Financial Plan, each Project of the World Bank.
financial plans that detail the annual Detailed Financial Plan and each IFAD means the International Fund
and quarterly budget and projected cash amendment, supplement or other for Agricultural Development.
requirements for the Program (including change thereto. Implementation Letter is a letter that
administrative costs) and each Project, Financial Plan Annex means Annex II may be issued by MCC from time to
projected both on a commitment and of this Compact, which summarizes the time to furnish additional information
cash requirement basis. Multi-Year Financial Plan for the or guidance to assist the Government in
Disbursement Agreement is a Program. the implementation of this Compact.
Supplemental Agreement that MCC, the Fiscal Accountability Plan shall have Implementation Plan is a detailed
Government (or a mutually acceptable the meaning set forth in Section 4(c) of plan for the implementation of the
Government Affiliate) and MCA- Annex I. Program and each Project, which will be
Armenia shall enter into that (i) further Fiscal Agent shall have the meaning memorialized in one or more documents
specifies the terms and conditions of set forth in Section 3(g) of Annex I. and shall consist of: (i) A Financial
any MCC Disbursements and Re- Fiscal Agent Agreement is an Plan; (ii) a Fiscal Accountability Plan;
Disbursements, (ii) is in a form and agreement between MCA-Armenia and (iii) Procurement Plans; (iv) Program
substance mutually satisfactory to the each Fiscal Agent, in form and and Project Work Plans; and (v) an M&E
Parties, and (iii) is signed by the substance satisfactory to MCC, that sets Plan.
Principal Representative of each Party forth the roles and responsibilities of the Implementing Entity means a
(or in the case of the Government, the Fiscal Agent and other appropriate Government Affiliate, nongovernmental
principal representative of the terms and conditions, such as payment organization or other public- or private-
applicable Government Affiliate) and of of the Fiscal Agent. sector entity or persons to which MCA-
GDP means gross domestic product. Armenia may provide MCC Funding to
MCA-Armenia.
EMPs means environmental Governance Agreement is an agency implement and carry out the Projects or
management plans. agreement to be entered into by the any other activities to be carried out in
Entry into Force means the entry into Government, MCC and MCA-Armenia, furtherance of this Compact.
force of this Compact, which shall be on that, in addition to the Governing Implementing Entity Agreement is an
the date of the last letter in an exchange Documents, sets forth the terms and agreement between MCA-Armenia and
an Implementing Entity, in form and responsibility for the implementation of summary attached to this Compact as
substance satisfactory to MCC, that sets this Compact. Exhibit A of Annex II.
forth the roles and responsibilities of Material Agreement shall have the NGOs means non-governmental
such Implementing Entity and other meaning set forth in Section 3(c)(i)(3) of organizations.
appropriate terms and conditions, such Annex I. Objective(s) are the following project-
as payment of the Implementing Entity. Material Re-Disbursement means any level objectives of this Compact that
Indicators means the quantitative, Re-Disbursement that requires MCC have been identified by the Parties, each
objective and reliable data that the M&E approval under applicable law, the of which is (i) key to advancing the
Plan will use to measure the results of Governing Documents, the Procurement Compact Goal and (ii) described in more
the Program. Agreement, Procurement Guidelines, or detail in the Annexes attached hereto:
Infrastructure Activity is the Project any Supplemental Agreement. (a) The Rural Road Rehabilitation
Activity described in Section 2(a) of Material Terms of Reference means Objective and (b) the Irrigated
Schedule 2 of Annex I under the any terms of reference for the Agriculture Objective.
Irrigated Agriculture Project. procurement of goods, services or works Objective Indicator means the
Inspector General means the Inspector that require MCC approval under Indicator for each Objective in the M&E
General of the United States Agency for applicable law, the Governing Plan that will measure the final results
International Development. Documents, the Procurement of the Projects to monitor their success
Irrigated Agriculture Objective is an Agreement, Procurement Guidelines, or in meeting each of the Objectives. A
Objective of this Compact to increase any Supplemental Agreement. table of Objective Indicator definitions
the productivity of the agricultural MCA means the Millennium is set forth at Section 2(a)(ii) of Annex
sector by extending and improving the Challenge Account. III.
quality of the irrigation system, MCA-Armenia shall have the meaning Observers means the non-voting
strengthening the entities that manage set forth in the Recitals. observers of the Governing Council
the system and enabling farmers to MCA-Armenia Web site means the described in Section 3(d)(ii)(2) of Annex
commercialize their products. Web site operated by MCA-Armenia. I.
MCA Eligibility Criteria means the
Irrigated Agriculture Project means Outcome Indicator means the
MCA selection criteria and methodology
the Project described and summarized Indicator in the M&E Plan that will
published by MCC pursuant to section
in Schedule 2 of Annex I that the Parties measure the intermediate results
607 of the Act from time to time.
intend to implement in furtherance of achieved under each of the Project
MCC means the Millennium
the Irrigated Agriculture Objective. Activities to provide an early measure of
Challenge Corporation.
Irrigation PIU means the Water Sector the likely impact of the Project
MCC Disbursement means the
Development and Institutional Project Activities. A table of Outcome Indicator
disbursement of MCC Funding by MCC
Implementation Unit under the definitions is set forth at Section 2(a)(ii)
from time to time to a Permitted
authority of the State Water Committee of Annex III.
Account or through such other
that will implement the Infrastructure mechanism agreed by the Parties as Outcomes is the progress made
Activity of the Irrigated Agriculture defined in and in accordance with toward the Objectives and the
Project. Section 2.1(b)(i) of this Compact. intermediate results of each Project and
Lien means any lien, attachment, MCC Disbursement Request means the Project Activity.
enforcement of judgment, pledge, or applicable request that the Government Output Indicator means the Indicator
encumbrance of any kind. and MCA-Armenia will jointly submit in the M&E Plan to measure the direct
LLN means a lifeline network of roads for an MCC Disbursement as may be outputs of the Project Activities.
from among the republican and local specified in the Disbursement Outside Project Manager means the
roads in Armenia, the objective of Agreement. qualified persons or entities engaged by
which is to ensure that all communities, MCC Funding shall have the meaning MCA-Armenia, to serve as outside
towns and villages are linked to the set forth in Section 2.1(a). project managers in accordance with
main road network, either directly or MCC Indemnified Party means MCC Section 3(f) of Annex I.
through other communities. and any officer, director, employee, Parties means the United States,
Local Account is an interest-bearing Affiliate, contractor, agent or acting through MCC, and the
local currency of Armenia account at representative of MCC. Government.
either the Central Bank of Armenia or at MCC Representative is a Party means (i) the United States,
a commercial bank that is procured representative appointed by MCC to acting through MCC or (ii) the
through a competitive process to which serve as an Observer on the Governing Government.
the Fiscal Agent may authorize transfers Council. Permitted Account(s) shall have the
from any U.S. Dollar Permitted Account Monitoring Component means the meaning set forth in Section 4(d) of
for the purpose of making Re- component of the M&E Plan that Annex I.
Disbursements payable in local specifies how progress toward the Permitted Designee shall have the
currency. Objectives and intermediate results of meaning set forth in Section 3.2(c).
M&E Annex means Annex III of this each Project and Project Activity set Pledge means any pledge of any MCC
Compact, which generally describes the forth in the M&E Annex will be Funding or any Program Assets, or any
components of the M&E Plan for the monitored. guarantee (directly or indirectly) of any
Program. MoTC means the Ministry of indebtedness.
M&E Plan means the plan to measure Transport and Communications. Principal Representative means (i) for
and evaluate progress toward Multi-Year Financial Plan means the the Government, the individual holding
achievement of the Compact Goal and multi-year financial plan for the the position of, or acting as, the Minister
Objectives of this Compact. Program and for each Project, which is of Finance and Economy, and (ii) for
Management Unit means the summarized in Annex II. MCC, the individual holding the
management unit of MCA-Armenia that Multi-Year Financial Plan Summary position of, or acting as, the Vice
will have overall management means a multi-year Financial plan President of Operations.
Procurement Agent(s) are the Re-Disbursement is the release of Exhibit B—List of Certain Supplemental
procurement agents that MCA-Armenia MCC Funding from a Permitted Agreements
will engage to carry out and/or certify Account. 1. Governance Agreement.
specified procurement activities in Reviewer shall have the meaning set 2. Fiscal Agent Agreement.
furtherance of this Compact on behalf of forth in Section 3(h) of Annex I. 3. Implementing Entity Agreements.
the Government, MCA-Armenia, any Rural Road Rehabilitation Objective is 4. Bank Agreement.
Outside Project Manager or an Objective of this Compact to expand
Implementing Entity. the access of rural communities to Schedule 2.1(a)(iii)—Description of
Procurement Agent Agreement is an agricultural markets, non-farm income Compact Implementation Funding
agreement between MCA-Armenia and opportunities and social infrastructure Compact Implementation Funding
each Procurement Agent, in form and by improving the condition of rural
The Compact Implementation
substance satisfactory to MCC, that sets roads.
Funding provided pursuant to Section
forth the roles and responsibilities of the Rural Road Rehabilitation Project
2.1(a)(iii) shall support the following
Procurement Agent with respect to the means the Project described and
activities and expenditures in an
conduct, monitoring and review of summarized in Schedule 1 of Annex I
amount not to exceed the amounts
procurements and other appropriate that the Parties intend to implement in
specified below:
terms and conditions, such as payment furtherance of the Rural Road (a) Payments for reasonable and
of the Procurement Agent. Rehabilitation Objective. normal staff salaries and administrative
Procurement Agreement is a Stakeholders’ Committee is a
expenses of MCA-Armenia (or mutually
Supplemental Agreement between the committee that shall be representative of
acceptable Government Affiliate) such
Government (and/or a mutually the various beneficiaries of the Program
as rent, computers, and other
acceptable Government Affiliate such as and as is further described in Section
information technology equipment, in
MCA-Armenia) and MCC, which 3(d)(iv)(1) of Annex I.
an amount not to exceed USD
includes the Procurement Guidelines, Supplemental Agreement shall have
$500,000; * and
and governs the procurement of all the meaning set forth in Section 3.5(b). (b) Conduct fiscal and procurement
goods, services and works by the Supplemental Agreement between the
administration activities, in an amount
Government or any Provider in Parties means any agreement between
not to exceed USD $500,000.*
furtherance of this Compact. MCC on the one hand, and the
Procurement Guidelines shall have Government or any Government [* Note: Notwithstanding the amount
the meaning set forth in Section 3.6(a). Affiliate or Permitted Designee on the specified for this activity or payment, the
Procurement Plan means a other hand. total amount of funds disbursed in
procurement plan adopted by MCA- Supplemental Agreement Term accordance with Section 2.1(a)(iii) shall not
exceed the amount set forth in Section
Armenia, which forecasts the upcoming Sheets shall have the meaning set forth 2.1(a)(iii).]
six month procurement activities and be in Section 4.1(b).
updated every six months. Target means each Indicator will have Annex I—Program Description
Program means the program to be one or more expected results that
implemented under this Compact using specify the expected value and the This Annex I to the Compact (the
MCC Funding to advance Armenia’s expected time by which that result will ‘‘Program Annex’’) generally describes
progress towards economic growth and be achieved. the Program that MCC Funding will
poverty reduction. Tax(es) shall have the meaning set support in Armenia during the Compact
Program Annex means Annex I to this forth in Section 2.3(e)(i). Term and the results to be achieved
Compact, which generally describes the USAID means the United States from the investment of MCC Funding.
Program that MCC Funding will support Agency for International Development. Prior to any MCC Disbursement or Re-
in Armenia during the Compact Term USDA means the United States Disbursement, including for the Projects
and the results to be achieved from the Department of Agriculture. described herein, MCC, the Government
investment of MCC Funding. United States Dollars or U.S. Dollars (or a mutually acceptable Government
Program Assets means (i) MCC (USD) means the currency of the United Affiliate) and MCA-Armenia shall enter
Funding, (ii) Accrued Interest, or (iii) States of America. into a Supplemental Agreement that (i)
any assets, goods, or property (real, United States Government means any further specifies the terms and
tangible, or intangible) purchased or branch, agency, bureau, government conditions of such MCC Disbursements
financed in whole or in part by MCC corporation, government chartered and Re-Disbursements, (ii) is in a form
Funding. entity or other body of the Federal and substance mutually satisfactory to
Project(s) are the specific projects and government of the United States. the Parties, and (iii) is signed by the
the policy reforms and other activities VAT means value-added taxes. Principal Representative of each Party
related thereto that the Government will Voting Members are the voting (or in the case of the Government, the
carry out, or cause to be carried out in members on the Governing Council as principal representative of the
furtherance of this Compact to achieve described in Section 3(d)(ii)(2) of Annex applicable Government Affiliate) and of
the Objectives and the Compact Goal, I. MCA-Armenia (the ‘‘Disbursement
specifically the Rural Road Water-to-Market Activity is the Project Agreement’’).
Rehabilitation Project and the Irrigated Activity described in Section 2(b) of Except as specifically provided
Agriculture Project. Schedule 2 of Annex I under the herein, the Parties may amend this
Project Activity means the activities Irrigated Agriculture Project. Program Annex only by written
that will be undertaken in furtherance of Work Plans means work plans for the agreement signed by the Principal
overall administration of the Program Representative of each Party. Except as
each Project.
Proposal is the proposal for use of and for each Project. defined in this Program Annex, each
MCA assistance submitted to MCC by WSA means the national Water capitalized term in this Program Annex
the Government on March 28, 2005. Supply Agency. shall have the same meaning given such
Provider shall have the meaning set WUAs means Water User term elsewhere in this Compact. Unless
forth in Section 2.4(b). Associations. otherwise expressly stated, each Section
reference herein is to the relevant feedback mechanism reaching out to Projects that the Government will
Section of the main body of the stakeholders, particularly those implement, or cause to be implemented,
Compact. involved in irrigation, rural road, policy using MCC Funding, each of which is
development and advocacy, and groups described in the Schedules to this
1. Background; Consultative Process
that specialize in monitoring and Program Annex. The Schedules to this
(a) Background. Economic evaluation. Program Annex identify the activities
development in Armenia suffered a The Government engaged in rounds of that will be undertaken in furtherance of
severe setback in the early 1990s regional, municipal, and local village each Project (each, a ‘‘Project Activity’’).
following the collapse of the Soviet level meetings to seek input and Notwithstanding anything to the
Union. In 1994, Armenia adopted a feedback on potential Proposal contrary in this Compact, the Parties
comprehensive stabilization and reform components. Meetings were held may agree to amend, terminate or
program that transformed it into a outside of city centers with suspend these Projects or Project
liberal market economy and launched a announcements published beforehand. Activities or create a new project by
period of uninterrupted growth with an In addition to face-to-face meetings, the written agreement signed by the
average increase of eight percent of Government utilized various forms of Principal Representative of each Party
gross domestic product (‘‘GDP’’) per mass media to reach more remote areas without amending this Compact;
year. In recent years, the Government of Armenia, including radio and provided, however, any such
has continued to focus on improving the television announcements and amendment of a Project or Project
business investment climate by programs, electronic mailing lists that Activity or creation of a new project is
pursuing macroeconomic stability, low are managed by non-governmental (i) consistent with the Objectives; (ii)
inflation, strong fiscal discipline, and organizations (‘‘NGOs’’) throughout does not cause the amount of MCC
the privatization of state-owned Armenia, and the printing of Funding to exceed the aggregate amount
enterprises. information brochures. specified in Section 2.1(a) of this
Armenia’s economic growth, The selection of the irrigation and Compact; (iii) does not cause the
however, has mainly benefited rural roads components of the Program Government’s responsibilities or
inhabitants of the capital Yerevan and a also introduced new challenges that contribution of resources to be less than
few other cities, and poverty remains focused on issues ranging from specified in Section 2.2 of this Compact
widespread among the rural population. communal land rights and or elsewhere in this Compact; and (iv)
In 2004, per capita GDP was estimated responsibilities, sustainability of the does not extend the Compact Term.
at USD $1,100, with 35 percent of the investments and involvement of civil
population classified as poor. Data from (c) Beneficiaries. The intended
society in compact development and
household surveys show that the impact beneficiaries of each Project are
implementation. To address concerns of
of agricultural sector growth on described in the respective Schedule to
the NGO community, the Government
reducing rural poverty in Armenia has this Program Annex and Annex III to the
offered to have the NGOs elect their
been much stronger than that of GDP extent identified as of the date hereof.
own representatives to participate in the
growth. Consequently, specific policies The intended beneficiaries shall be
meetings of the MCA-Armenia Board of
and investments aimed at promoting identified more precisely during the
Trustees—an inter-governmental body,
sustainable growth in the agricultural initial phases of the implementation of
chaired by the Prime Minister that was
sector are central to bringing about a the Program. The Parties shall agree
established to oversee the MCC Proposal
reduction in rural poverty. upon the description of the intended
and Compact development process.
There are two important beneficiaries of the Program, including
Using existing NGO electronic mailing
preconditions for growth in the publishing such description on the
lists and a self-regulated selection
Armenian agricultural sector: (i) MCA-Armenia Web site.
process, NGOs voted to select three
Investment in the rural road network, representatives to participate in the (d) Civil Society. Civil society will
which is essential for improving access meetings. participate in overseeing the
to markets and communities and (ii) The Government has created and implementation of the Program through
investment in irrigated agriculture to maintains an interactive Web site its representation on the Stakeholders’
increasing productivity. Only 10 percent (http://www.mca.am) (the ‘‘MCA- Committee as further described in
of Armenia’s rural road network is in Armenia Web site’’) that provides access Section 3(d)(iv) of this Program Annex.
good condition and there has been to up-to-date information and a forum In addition, the Work Plans for each
minimal investment in, or maintenance page on which to post and debate issues Project shall note the extent to which
of, the network over the past decade. related to the Proposal process. The civil society will have a role in the
Currently, less than ten percent of total MCA-Armenia Web site also makes implementation of a particular Project
agricultural land is irrigated, while publicly available the Board of Trustees Activity. Finally, members of civil
nearly 85 percent of total crop meeting minutes and the minutes of all society may be recipients of training or
production is produced with irrigation. meetings convened to discuss the other public awareness programs that
(b) Consultative Process. In Proposal. are related to the Project Activities.
connection with the Program, Armenia (e) Monitoring and Evaluation. Annex
engaged in a comprehensive 2. Overview III of this Compact generally describes
consultative process based on the (a) Program. The Program involves a the plan to measure and evaluate
Poverty Reduction Strategy Paper series of specific and complementary progress toward achievement of the
initiated in 2003. In the initial priority- interventions that the Parties expect will Compact Goal and Objectives of this
setting stage, the Government engaged a achieve the Irrigated Agriculture Compact (the ‘‘M&E Plan’’). As outlined
broad cross-section of the public, Objective and the Rural Road in the Disbursement Agreement and
specifically civil society and rural Rehabilitation Objective and advance other Supplemental Agreements,
communities, in a consultative process the progress of Armenia toward the continued payment of MCC Funding
focused on MCA compact development. Compact Goal. under this Compact will be contingent
Issues were addressed through a (b) Projects. To achieve the on successful achievement of targets set
continuous process that incorporated a Objectives, the Parties have identified forth in the M&E Plan.
3. Implementation Framework Government shall promptly deliver to following in furtherance of this

The implementation framework and MCC certified copies of any documents, Compact:
the plan for ensuring adequate orders, decrees, laws or regulations (A) Auditor or Reviewer;
evidencing such legal, legislative, (B) Fiscal Agent;
governance, oversight, management,
regulatory, procedural, contractual or (C) Bank;
monitoring, evaluation and fiscal (D) Procurement Agent;
accountability for the use of MCC other actions.
(ii) During the Compact Term, the (E) Outside Project Manager;
Funding is summarized below and in (F) Implementing Entity; and
the Schedules attached to this Program Government shall ensure that MCA-
Armenia is duly authorized and (G) Director, Observer, officer and/or
Annex, or as may otherwise be agreed other key employee or contractor of
in writing by the Parties. organized and sufficiently staffed and
empowered to fully carry out the MCA-Armenia, including any
(a) General. The elements of the compensation for such person. (Any
implementation framework will be Designated Rights and Responsibilities.
Without limiting the generality of the agreement described in clause (i)
further described in relevant through (iii) of this Section 3(c)(i)(3) and
Supplemental Agreements and in a preceding sentence, MCA-Armenia shall
be organized, and have such roles and any amendments and supplements
detailed plan for the implementation of thereto, each, a ‘‘Material Agreement’’);
the Program and each Project (the responsibilities, as described in Section
3(d) of this Program Annex and as (4) Any modification, termination or
‘‘Implementation Plan’’), which will be suspension of a Material Agreement, or
memorialized in one or more documents provided in the Governance Agreement
and any Governing Documents, which any action that would have the effect of
and shall consist of a Financial Plan, a such a modification, termination or
Fiscal Accountability Plan, Procurement shall be in a form and substance
satisfactory to MCC; provided, however, suspension of a Material Agreement;
Plans, Program and Project Work Plans, (5) Any agreement that is (i) not at
and an M&E Plan. MCA-Armenia shall the Government may, subject to MCC
arm’s length or (ii) with a party related
adopt each component of the approval, carry out any of the roles and
to the Government, including MCA-
Implementation Plan in accordance responsibilities designated to be carried
Armenia, or any of their respective
with the requirements and timeframe as out by MCA-Armenia and described in
Affiliates;
may be specified in this Program Annex, Section 3(d) of this Program Annex or
(6) Any Re-Disbursement (each, a
the Disbursement Agreement or as may elsewhere in this Program Annex,
‘‘Material Re-Disbursement’’) that
otherwise be agreed by the Parties from applicable law, the Governing
requires such MCC approval under
time to time. MCA-Armenia may amend Documents, or any Supplemental
applicable law, the Governing
the Implementation Plan or any Agreement prior to and during the
Documents, the Procurement
component thereof without amending initial period of the establishment and
Agreement, Procurement Guidelines or
this Compact, provided, any material staffing of MCA-Armenia, but in no
any Supplemental Agreement;
amendment of the Implementation Plan event longer than the earlier of (i) the (7) Terms of reference for the
or any component thereof has been formation of the Management Unit and procurement of goods, services or works
approved by MCC and is otherwise the engagement of each of the officers that require such MCC approval under
consistent with the requirements of this and (ii) six months from the Entry into applicable law, the Governing
Compact and any relevant Force, unless otherwise agreed by the Documents, the Procurement
Supplemental Agreement between the Parties in writing. Agreement, Procurement Guidelines or
Parties. By such time as may be (c) MCC. any Supplemental Agreement (each, a
specified in the Disbursement (i) Notwithstanding Section 3.1 of this ‘‘Material Terms of Reference’’);
Agreement or as may otherwise be Compact or any provision in this (8) The Implementation Plan,
agreed by the Parties from time to time, Program Annex to the contrary, and including each component plan thereto,
MCA-Armenia shall adopt one or more except as may be otherwise agreed upon and any material amendments and
work plans for the overall by the Parties from time to time, MCC supplements to the Implementation
administration of the Program and for must approve in writing each of the Plan or any component thereto;
each Project (collectively, the ‘‘Work following transactions, activities, (9) Any pledge of any MCC Funding
Plans’’). The Work Plan(s) shall set forth agreements and documents prior to the or any Program Assets or any guarantee
the details of each activity to be execution or carrying out of such (directly or indirectly) of any
undertaken or funded by MCC Funding transaction, activity, agreement or indebtedness (each, a ‘‘Pledge’’);
as well as the allocation of roles and document and prior to MCC (10) Any decree, legislation,
responsibilities for specific Project Disbursements or Re-Disbursements in contractual arrangement or other
activities, or other programmatic connection therewith: document establishing or governing
guidelines, performance requirements, (1) MCC Disbursements; MCA-Armenia, including the
targets, or other expectations for a (2) The Financial Plan and any Governance Agreement and the charter
Project. amendments and supplements thereto; of MCA-Armenia (the ‘‘Governing
(b) Government. (3) Agreements (i) between the Documents’’), and any disposition (in
(i) The Government shall promptly Government and MCA-Armenia, (ii) whole or in part), liquidation,
take all necessary and appropriate between the Government, MCA- dissolution, winding up, reorganization
actions to carry out the Government Armenia or other Government Affiliate, or other change of (A) MCA-Armenia,
Responsibilities under and in on the one hand, and any Provider or including any revocation or
furtherance of this Compact, including Affiliate of a Provider, on the other modification of, or supplement to, any
undertaking or pursuing such legal, hand, which require such MCC approval Governing Document, or (B) any
legislative or regulatory actions, under applicable law, the Governing subsidiary or Affiliate of MCA-Armenia;
procedural changes and contractual Documents, the Procurement Agreement (11) Any change in character or
arrangements as may be necessary or or any other Supplemental Agreement, location of any Permitted Account;
appropriate to achieve the Objectives, to or (iii) in which the Government, MCA- (12) Formation or acquisition of any
successfully implement the Program, Armenia or other Government Affiliate subsidiary (direct or indirect) or other
and to establish MCA-Armenia. The appoints, hires or engages any of the Affiliate of MCA-Armenia;
(13) Any (A) change of a Director, or contract any of the Designated Rights (b) Subject to the Governing
Observer, officer or other key employee and Responsibilities without the prior Documents, the Parties contemplate that
or contractor of MCA-Armenia, or in the written consent of the Government and the Prime Minister shall initially fill the
composition of the Governing Council, MCC. MCA-Armenia shall not establish seat of Chair;
including approval of the nominee for any Affiliates or subsidiaries (direct or (c) Each Government Member
Chair, or (B) filling of any vacant seat of indirect) without the prior written position shall be filled by the individual
the Chair, a Director or an Observer or consent of the Government and MCC; then holding the office identified and
vacant position of an officer or other key and such individuals shall serve in their
employee or contractor of MCA- (2) Unless otherwise agreed by the capacity as the applicable Government
Armenia; Parties in writing, MCA-Armenia shall official and not in their personal
(14) The management information consist of (a) an independent governing capacity. In the event that a Government
system to be developed and maintained council (the ‘‘Governing Council’’) to Member is unable to participate in a
by the Management Unit of MCA- oversee MCA-Armenia’s responsibilities meeting of the Governing Council such
Armenia, and any material and obligations under this Compact member’s principal deputy or
modifications to such system; (including any Designated Rights and equivalent may participate in the
(15) Any decision to amend, Responsibilities) and (b) a management member’s stead; and
supplement, replace, terminate or unit (the ‘‘Management Unit’’) to have (d) Each Civil Society Member may
otherwise change any of the foregoing; overall management responsibility for appoint an alternate, approved by
and the implementation of this Compact. majority vote of the other Civil Society
(16) Any other activity, agreement, (ii) Governing Council. Members, to serve when he or she is
document or transaction requiring the unable to participate in a meeting of the
(1) Formation. The Government shall
approval of MCC in this Compact, Governing Council.
ensure that the Governing Council shall
applicable law, the Governing (B) The Observers shall be:
be formed, constituted, governed,
Documents, the Procurement (i) A representative appointed by
maintained and operated in accordance
Agreement, Procurement Guidelines, MCC (the ‘‘MCC Representative’’); and
with applicable law and the terms and (ii) A representative of an
the Disbursement Agreement, or any
conditions set forth in this Section 3(d), environmentally focused NGO
other Supplemental Agreement between
the Governing Documents and relevant appointed by the Stakeholders’
the Parties.
Supplemental Agreements. Committee (the ‘‘Environmental
The Chair of the Governing Council
(the ‘‘Chair’’) and/or the Chief Executive (2) Composition. Unless otherwise Observer’’); provided, that if one of the
Officer of MCA-Armenia (the ‘‘Chief agreed by the Parties in writing, the Civil Society Members on the Governing
Executive Officer’’) or other designated Governing Council shall consist of Council already represents an
officer, as provided in applicable law eleven (11) voting members (the ‘‘Voting environmentally focused NGO, then
and the Governing Documents, shall Members’’) and two non-voting such Civil Society Member shall also act
certify any documents or reports observers (the ‘‘Observers’’), each of as the Environmental Observer. The
delivered to MCC in satisfaction of the whom must be acceptable to MCC, initial Environmental Observer shall
Government’s reporting requirements taking into consideration appropriate serve for a period of one year from the
under this Compact or any gender and ethnic representation. date of the first Governing Council
Supplemental Agreement between the (A) The Voting Members shall be as meeting after the Entry into Force, and
Parties (the ‘‘Compact Reports’’). follows, provided, that the members on each anniversary thereof, the
(ii) MCC shall have the authority to identified in subsections (i)–(vi) below Stakeholders’ Committee shall appoint
exercise its approval rights set forth in (the ‘‘Government Members’’) may be another representative to serve as the
this Section 3(c) in its sole discretion replaced by another government official Environmental Observer for the
and independent of any participation or of comparable rank from a ministry or subsequent year. The Stakeholders’
position taken by the MCC other government body relevant to the Committee may nominate an alternate to
Representative at a meeting of the Program activities, subject to approval attend one or more meetings of the
Governing Council. MCC retains the by the Government and MCC (such Governing Council in the event that the
right to revoke its approval of a matter replacement to be referred to thereafter Environmental Observer is unable to
if MCC concludes that its approval was as a Government Member): attend.
issued on the basis of incomplete, (i) Prime Minister; The Observers shall have the right to
inaccurate or misleading information (ii) Chief Economic Advisor to the attend all meetings of the Governing
furnished by the Government or MCA- President; Council, participate in discussions of
Armenia. (iii) Minister of Finance and the Governing Council, and receive all
(d) MCA-Armenia. Economy; information and documents provided to
(i) General. Unless otherwise agreed (iv) Minister of Transport and the Governing Council, together with
by the Parties in writing, MCA-Armenia Communication; any other rights of access to records,
shall be responsible for the oversight (v) Minister of Agriculture; employees or facilities as would be
and management of the implementation (vi) Minister of Territorial granted to a member of the Governing
of this Compact. MCA-Armenia shall be Administration; and Council under the Governance
governed by the Governing Documents, (vii) Five (5) members of civil society Agreement and any Governing
including the terms and conditions set appointed by the Stakeholders’ Document.
forth in an agency agreement to be Committee (the ‘‘Civil Society (3) Voting. Unless otherwise agreed by
entered into by the Government, MCC Members’’). the Parties, the Governing Documents of
and MCA-Armenia (the ‘‘Governance The following provisions apply to the MCA-Armenia shall include voting and
Agreement’’) on or before the Entry into Voting Members: quorum provisions so as to require
Force, and based on the following (a) Each Government Member may be participation by the Civil Society
principles: replaced by another government official, Members in all decisions of the
(1) The Government shall ensure that subject to approval by the Government Governing Council.
MCA-Armenia shall not assign, delegate and MCC; (4) Roles and Responsibilities.
(A) The Governing Council shall the jurisdiction of the courts or other provided by the Stakeholders’
oversee the overall implementation of body of Armenia. Committee and the ways in which that
the Program and the performance of the (iii) Management Unit. Unless feedback has informed the activities of
Designated Rights and Responsibilities. otherwise agreed in writing by the MCA-Armenia in the next following
(B) Certain actions may be taken, and Parties, the Management Unit shall quarterly report to the Governing
certain agreements and other documents report, through the Chief Executive Council.
may be executed and delivered, by Officer or other officer as designated in (C) Without limiting the foregoing
MCA-Armenia only upon the approval the Governing Documents, directly to general responsibilities or the generality
and authorization of the Governing the Governing Council, and shall have of Designated Rights and
Council as provided under applicable the composition, roles and Responsibilities that the Government
law and in the Governing Documents, responsibilities described below and set may designate to MCA-Armenia, the
including each MCC Disbursement forth more particularly in the Governing Management Unit shall develop the
Request, selection or termination of Documents. components of the Implementation
certain Providers, any component of the (1) Composition. The Government Plan, oversee the implementation of the
Implementation Plan, certain Re- shall ensure that the Management Unit Projects, manage and coordinate
Disbursements and certain terms of shall be composed of qualified experts monitoring and evaluation, maintain
reference. from the public or private sectors, internal accounting records, conduct
(C) The Chair shall certify the including such officers and staff as may and oversee certain procurements, and
approval by the Governing Council of be necessary to carry out effectively its such other responsibilities as set out in
all Compact Reports or any other responsibilities, each with such powers the Governing Documents or delegated
documents or reports from time to time and responsibilities as set forth in the to the Management Unit by the
delivered to MCC by MCA-Armenia Governance Agreement, any Governing Governing Council from time to time.
(whether or not such documents or Document, and from time to time in any (D) Subject to the provisions of this
Supplemental Agreement between the Compact, the Procurement Agreement
reports are required to be delivered to
Parties, including without limitation the and the Governing Documents,
MCC), and that such documents or
following: (i) A Chief Executive Officer, appropriate officers of the Management
reports are true, accurate and complete.
(ii) a chief financial officer, (iii) a Unit shall have the authority to contract
(D) Without limiting the generality of
monitoring and evaluation officer, (iv) on behalf of MCA-Armenia.
the Designated Rights and (E) The Management Unit shall have
an environment and social impact
Responsibilities, and subject to MCC’s officer, (v) a rural roads project officer, the obligation and right to approve
contractual rights of approval as set (vi) an irrigation project officer, (vii) a certain actions and documents or
forth in Section 3(c) of this Program water-to-market project officer and (viii) agreements, including certain Re-
Annex or elsewhere in this Compact or a procurement officer. The Management Disbursements, certain human resources
any relevant Supplemental Agreement, Unit will be supported by an office decisions, and certain procurement
the Governing Council shall have the manager and appropriate administrative actions, as provided in the Governing
exclusive authority for all actions and support personnel. Documents. The Management Unit shall
defined for the Governing Council (2) Appointment of Management Unit. also prepare MCC Disbursement
under applicable law and in the Unless otherwise specified in the Requests and Compact Reports for
Governing Documents and which are Governance Agreement or any approval by the Governing Council.
expressly designated therein as Governing Documents, the Governing (iv) Stakeholders’ Committee.
responsibilities that cannot be delegated Council shall appoint the Chief (1) Formation. The Government shall
further. Executive Officer after an open and ensure the establishment of a
(5) Meetings. The Governing Council competitive recruitment and selection stakeholders’ committee (the
shall hold at least quarterly meetings as process, which appointment shall be ‘‘Stakeholders’ Committee’’) that shall
well as such other periodic meetings or subject to the approval of MCC. The be representative of the various
subcommittee meetings as may be remaining officers of the Management beneficiaries of the Program. Unless
necessary from time to time. Unit shall be appointed by the Chief otherwise agreed by the Parties, the
(6) Indemnification of Civil Society Executive Officer after an open and Government shall invite members of the
Members; MCC Representative. The competitive recruitment and selection NGO community, representatives of the
Government shall ensure, at the process, which appointments shall be WUAs and farmer groups to participate
Government’s sole cost and expense, subject to the approval of the Governing in national and regional forums to elect
that appropriate insurance is obtained Council and MCC. the Stakeholders’ Committee. The
and appropriate indemnifications and (3) Roles and Responsibilities. Government will provide adequate
protections are provided, acceptable to (A) The Management Unit shall assist notice of such forums to ensure
MCC, to ensure that Civil Society the Governing Council in overseeing the widespread participation. Initially, the
Members shall not be held personally implementation of the Program and Stakeholders’ Committee will consist of
liable for the actions or omissions of the shall have principal responsibility eleven (11) members, taking into
Governing Council. Pursuant to Section (subject to the direction and oversight of consideration appropriate gender and
5.5 and Section 5.8 of this Compact, the the Governing Council and subject to ethnic representation. The number of
Government and MCA-Armenia shall MCC’s rights of approval as set forth in members of the Stakeholders’
hold harmless the MCC Representative Section 3(c) of this Program Annex or Committee may be increased, but in no
and the Environmental Observer for any elsewhere in this Compact or any event to more than fifteen (15) members,
liability or action arising out of their relevant Supplemental Agreement) for upon the majority vote of the then
roles as non-voting Observers on the the overall management of the existing members and the vacancies
Governing Council. The Government implementation of the Program. created by such increase shall be filled
hereby waives and releases all claims (B) The Management Unit shall report by the majority vote of the then existing
related to any such liability. In matters to and meet with, on a quarterly basis, members, subject to the approval of
arising under or relating to the Compact, the Stakeholders’ Committee, and shall MCA-Armenia and MCC. Each
the MCC Representative is not subject to include a report on the feedback Stakeholders’ Committee member may
appoint an alternate, approved by one or more nongovernmental or other in the Disbursement Agreement, the
majority vote of the other members, to public- or private-sector entities or Fiscal Agent Agreement and other
serve when he or she is unable to persons to implement and carry out the relevant Supplemental Agreements, (ii)
participate in a meeting of the Projects or any other activities to be instructing a Bank to make Re-
Stakeholders’ Committee. carried out in furtherance of this Disbursements from a Permitted
(2) Roles and Responsibilities. Compact (each, an ‘‘Implementing Account, following applicable
(A) The Stakeholders’ Committee Entity’’). The Government shall ensure certification by the Fiscal Agent, (iii)
shall be a mechanism to provide that MCA-Armenia enters into an providing applicable certifications for
representatives of the private sector, agreement with each Implementing MCC Disbursement Requests, (iv)
civil society and local and regional Entity, in form and substance maintaining proper accounting of all
communities the opportunity to provide satisfactory to MCC, that sets forth the MCC Funding financial transactions,
advice and input to MCA-Armenia roles and responsibilities of such and (v) producing reports on MCC
regarding the implementation of the Implementing Entity and other Disbursements and Re-Disbursements
Compact. appropriate terms and conditions, such (including any requests therefore) in
(B) During quarterly meetings of the as payment of the Implementing Entity accordance with established procedures
Stakeholders’ Committee, the (the ‘‘Implementing Entity Agreement’’). set forth in the Disbursement
Management Unit shall present an An Implementing Entity shall report Agreement, the Fiscal Agent Agreement
update on the implementation of this directly toMCA-Armenia as designated or any other relevant Supplemental
Compact and progress towards in the applicable Implementing Entity Agreements. Upon the written request of
achievement of the Objectives. The Agreement or as otherwise agreed by the MCC, the Government shall ensure
Management Unit shall provide copies Parties. thatMCA-Armenia terminates a Fiscal
of the M&E Plan, the Implementation (f) Outside Project Manager.MCA- Agent, without any liability to MCC,
Plan, and reports on the Projects and Armenia shall have the authority to and the Government shall ensure
Project Activities. The Stakeholders’ engage qualified persons or entities to thatMCA-Armenia engages a new Fiscal
Committee will have an opportunity to serve as outside project managers (each, Agent, subject to the approval by the
regularly provide to the Chief Executive an ‘‘Outside Project Manager’’) in the Governing Council and MCC. The
Officer and to the Governing Council its event that it is advisable to do so for the Government shall ensure thatMCA-
views and recommendations. The proper and efficient day-to-day Armenia enters into an agreement with
Governing Council may, in response to management of a Project; provided, each Fiscal Agent, in form and
the Stakeholders’ Committee, require however, that the appointment or substance satisfactory to MCC, that sets
the Management Unit to provide such engagement of any Outside Project forth the roles and responsibilities of the
other information and documents as the Manager after a competitive selection Fiscal Agent and other appropriate
Governing Council deems advisable. process shall be subject to approval by terms and conditions, such as payment
(C) The Management Unit shall the Governing Council and MCC prior to of the Fiscal Agent (‘‘Fiscal Agent
include in its quarterly reports to the such appointment or engagement. Upon Agreement’’).
Governing Council, a report on the Governing Council approval,MCA-
Stakeholders’ Committee meetings that Armenia may delegate, assign, or (h) Auditors and Reviewers. The
occurred during the period covered by contract to the Outside Project Managers Government shall ensure thatMCA-
such report. such duties and responsibilities as it Armenia carries out the Government’s
(D) The Stakeholders’ Committee deems appropriate with respect to the audit responsibilities as provided in
shall appoint one of their members to be management of the Implementing Sections 3.8(d), (e) and (f), including
the secretary to, among other things, Entities and the implementation of the engaging one or more auditors (each, an
take official minutes of the meetings of specific Projects; and provided, further, ‘‘Auditor’’) required by Section 3.8(d).
the Stakeholders’ Committee. that the Management Unit shall remain As requested by MCC in writing from
(3) Meetings. The Stakeholders’ accountable for those duties and time to time, the Government shall
Committee shall hold quarterly responsibilities and all reports delivered ensure thatMCA-Armenia shall also
meetings of the full Stakeholders’ by the Outside Project Manager engage an independent (i) reviewer to
Committee as well as such other notwithstanding any such delegation, conduct reviews of performance and
periodic meetings of the Stakeholders’ assignment or contract and the Outside compliance under this Compact
Committee or subcommittees thereof Project Manager shall be subject to the pursuant to Section 3.8(f), which
designated along sectoral, regional, or oversight of the Fiscal Agent and reviewer shall have the capacity to (1)
other lines, as may be necessary or Procurement Agent. The Governing conduct general reviews of performance
appropriate from time to time. Council may determine that it is or compliance, (2) conduct
(4) Accessibility; Transparency. advisable to engage one or more Outside environmental and social audits, and (3)
Stakeholders’ Committee members will Project Managers and instructMCA- conduct data quality assessments in
be accessible to the beneficiaries they Armenia and, where appropriate, a accordance with the M&E Plan, as
represent to receive the beneficiaries’ Procurement Agent to commence and described more fully in Annex III, and/
comments or suggestions regarding the conduct the competitive selection or (ii) evaluator to assess performance as
Program. The minutes of all meetings of process for such Outside Project required under the M&E Plan (each, a
the Stakeholders’ Committee and any Manager. ‘‘Reviewer’’).MCA-Armenia shall select
subcommittees shall be made public on (g) Fiscal Agent. The Government the Auditor(s) or Reviewers in
the MCA-Armenia Web site in a timely shall ensure thatMCA-Armenia engages accordance with the Governing
manner. one or more fiscal agents (each, a Documents or relevant Supplemental
(e) Implementing Entities. Subject to ‘‘Fiscal Agent’’), who shall be Agreement. The Government shall
the terms and conditions of this responsible for, among other things, (i) ensure thatMCA-Armenia enters into an
Compact and any other Supplemental ensuring and certifying that Re- agreement with each Auditor or
Agreement between the Parties, MCA- Disbursements are properly authorized Reviewer, in form and substance
Armenia may provide MCC Funding, to and documented in accordance with satisfactory to MCC, that sets forth the
one or more Government Affiliates or to established control procedures set forth roles and responsibilities of the Auditor
or Reviewer with respect to the audit, quarterly budget and projected cash the size and type of Re-Disbursement in
review or evaluation, including access requirements for the Program (including accordance with the Governing
rights, required form and content of the administrative costs) and each Project, Documents and Disbursement
applicable audit, review or evaluation projected both on a commitment and Agreement; provided, however, unless
and other appropriate terms and cash requirement basis (each a ‘‘Detailed otherwise agreed by the Parties in
conditions such as payment of the Financial Plan’’). Each Detailed writing, no Re-Disbursement shall be
Auditor or Reviewer (the ‘‘Auditor/ Financial Plan shall be delivered by made unless and until the written
Reviewer Agreement’’). In the case of a such time as specified in the approvals specified herein or in the
financial audit required by Section Disbursement Agreement or as may Governing Documents and
3.8(f), such Auditor/Reviewer otherwise be agreed by the Parties. The Disbursement Agreement for such Re-
Agreement shall be effective no later Multi-Year Financial Plan, each Disbursement have been obtained and
than 120 days prior to the end of the Detailed Financial Plan and each delivered to the Fiscal Agent.
relevant fiscal year or other period to be amendment, supplement or other (c) Fiscal Accountability Plan. By
audited; provided, however, if MCC change thereto are collectively, the such time as specified in the
requires concurrent audits of financial ‘‘Financial Plan.’’ Disbursement Agreement or as
information or reviews of performance (iii) Expenditures. No financial otherwise agreed by the Parties, MCA-
and compliance under this Compact, commitment involving MCC Funding Armenia shall adopt as part of the
then such Auditor/Reviewer Agreement shall be made, no obligation of MCC Implementation Plan a fiscal
shall be effective no later than a date Funding shall be incurred, and no Re- accountability plan that identifies the
agreed by the Parties in writing. Disbursement shall be made or MCC principles and mechanisms to ensure
(i) Procurement Agent. If requested by Disbursement Request submitted for any appropriate fiscal accountability for the
MCC, the Government shall ensure activity or expenditure, unless the use of MCC Funding provided under
thatMCA-Armenia engages one or more expense is provided for in the Detailed this Compact, including the process to
procurement agents (each, a Financial Plan and unless uncommitted ensure that open, fair, and competitive
‘‘Procurement Agent’’) to carry out and/ funds exist in the balance of the procedures will be used in a transparent
or certify specified procurement Detailed Financial Plan for the relevant manner in the administration of grants
activities in furtherance of this Compact period or unless the Parties otherwise or cooperative agreements and the
on behalf of the Government,MCA- agree in writing. procurement of goods and services for
Armenia, any Outside Project Manager (iv) Modifications to Financial Plan. the accomplishment of the Objectives
or Implementing Entity. The roles and Notwithstanding anything to the (the ‘‘Fiscal Accountability Plan’’). The
responsibilities of such Procurement contrary in this Compact,MCA-Armenia Fiscal Accountability Plan shall set
Agent and the criteria for selection of a may amend or supplement the Financial forth, among other things, requirements
Procurement Agent shall be as set forth Plan or any component thereof without with respect to the following matters: (i)
in the applicable Implementation Letter amending this Compact, provided, any Funds control and documentation; (ii)
or Supplemental Agreement. The material amendment or supplement has separation of duties and internal
Government shall ensure thatMCA- been approved by MCC and is otherwise controls; (iii) accounting standards and
Armenia enters into an agreement with consistent with the requirements of this systems; (iv) content and timing of
the Procurement Agent, in form and Compact and any relevant reports; (v) policies concerning public
substance satisfactory to MCC, that sets Supplemental Agreement between the availability of all financial information;
forth the roles and responsibilities of the Parties. (vi) cash management practices; (vii)
Procurement Agent with respect to the (b) Disbursement and Re- procurement and contracting practices,
conduct, monitoring and review of Disbursement. The Disbursement including timely payment to vendors;
procurements and other appropriate Agreement (and disbursement schedules (viii) the role of independent auditors;
terms and conditions, such as payment thereto), as amended from time to time, and (ix) the roles of fiscal agents and
of the Procurement Agent (the shall specify the terms, conditions and procurement agents.
‘‘Procurement Agent Agreement’’). Any procedures on which MCC (d) Permitted Accounts. The
Procurement Agent shall adhere to the Disbursements and Re-Disbursements Government shall establish, or cause to
procurement standards set forth in the shall be made. The obligation of MCC to be established, such accounts (each, a
Procurement Agreement and make MCC Disbursements or approve ‘‘Permitted Account,’’ and collectively
Procurement Guidelines and ensure Re-Disbursements is subject to the ‘‘Permitted Accounts’’) as may be agreed
procurements are consistent with the fulfillment or waiver of any such terms by the Parties in writing from time to
procurement plan (the ‘‘Procurement and conditions. The Government and time, including:
Plan’’) adopted byMCA-Armenia, which MCA-Armenia shall jointly submit the (i) A single, completely separate U.S.
plan shall forecast the upcoming six applicable request for an MCC Dollar interest-bearing account at either
month procurement activities and be Disbursement (the ‘‘MCC Disbursement the Central Bank of Armenia or at a
updated every six months. Request’’) as may be specified in the commercial bank to receive MCC
Disbursement Agreement. MCC will Disbursements;
4. Finances and Fiscal Accountability make MCC Disbursements in tranches to (ii) If necessary, an interest-bearing
(a) Financial Plan. a Permitted Account from time to time local currency of Armenia account (the
(i) Financial Plan. The multi-year as provided in the Disbursement ‘‘Local Account’’) at either the Central
financial plan for the Program and for Agreement or as may otherwise be Bank of Armenia or at a commercial
each Project (the ‘‘Multi-Year Financial agreed by the Parties, subject to Program bank that is procured through a
Plan’’) is summarized in Annex II to this requirements and performance by the competitive process to which the Fiscal
Compact. Government, MCA-Armenia and other Agent may authorize transfer from any
(ii) Detailed Financial Plan. During relevant parties in furtherance of this U.S. Dollar Permitted Account for the
the Compact Term, the Government Compact. Re-Disbursements will be purpose of making Re-Disbursements
shall ensure thatMCA-Armenia delivers made from time to time based on payable in local currency; and
to MCC for approval timely financial requests by an authorized representative (iii) Such other interest-bearing
plans that detail the annual and of the appropriate party designated for accounts to receive MCC Disbursements
in such banks as the Parties mutually (ii) All minutes of the meetings of the committed to re-classifying the entire
agree upon in writing. Governing Council and Stakeholders’ LLN as republican roads so that they
No other funds shall be commingled Committee; will come under the management and
in a Permitted Account other than MCC (iii) The M&E Plan, as amended from maintenance responsibility of the ARD.
Funding and Accrued Interest thereon. time to time, along with periodic reports
All MCC Funding held in an interest- 2. Summary of the Project
on Program performance;
bearing Permitted Account shall earn (iv) All Project environmental and (a) Project Description. MCC Funding
interest at a rate of no less than such social impact assessments (‘‘ESIAs’’) will be used to rehabilitate up to 943 km
amount as the Parties may agree in the and supporting documents; of high priority LLN roads (45 percent
respective Bank Agreement or (v) All audit reports by an Auditor of the LLN), consisting of 85 road
otherwise. MCC shall have the right, and any periodic reports or evaluations segments throughout the country and
among other things, to view any by a Reviewer; amounting to 321 km of republican
Permitted Account statements and (vi) Disbursement Agreement, as roads and 622 km of local roads. All
activity directly on-line or at such other amended from time to time; rehabilitation works will be on existing
frequency as the Parties may otherwise (vii) All procurement policies and alignments and will include pavement
agree. By such time as shall be specified procedures (including standard rehabilitation, improvements to up to 19
in the Disbursement Agreement or as documents and procurement plans) and bridges, drainage facilities, and road
otherwise agreed by the Parties, the any other documents required to be safety features.
Government shall ensure that MCA- made publicly available pursuant to the MCA-Armenia will select roads from
Armenia enters into an agreement with Procurement Agreement; and among the LLN roads described above.
each Bank, respectively, satisfactory to (viii) A copy of any legislation and MCC Funding will be provided to
MCC, that sets forth the signatory other documents related to the rehabilitate selected roads subject to the
authority, access rights, anti-money formation, organization and governance condition that each road must:
laundering and anti-terrorist financing of MCA-Armenia, including the • Have an economic rate of return at
provisions, and other terms related to Governing Documents, and any least equal to 12.5 percent, calculated in
the Permitted Account, respectively amendments thereto. a manner acceptable to MCC and based
(each a ‘‘Bank Agreement’’). For on a feasibility study and final design;
Schedule 1 to Annex I—Rural Road • Conform to Government
purposes of this Compact, any bank Rehabilitation Project
holding a Permitted Account referenced requirements and MCC’s Environmental
in Section 4(d) of this Program Annex This Schedule 1 describes and Guidelines; and
are each a ‘‘Bank’’ and, are collectively summarizes the key elements of the • Conform to the World Bank policy
referred to as the ‘‘Banks.’’ rural road rehabilitation project (‘‘Rural on Involuntary Resettlement, where
(e) Currency Exchange. The Bank Road Rehabilitation Project’’) that the relevant.
shall convert MCC Funding to the Parties intend to implement in MCC Funding will also be provided to
currency of the Republic of Armenia at furtherance of the Rural Road ARD to conduct a technical audit of its
a rate to which the Parties mutually Rehabilitation Objective. Additional existing performance based
agree with the Bank in the Bank details regarding the implementation of maintenance contracts and for technical
Agreement. the Rural Road Rehabilitation Project assistance to create a long-term road
will be included in the Implementation maintenance strategic plan.
5. Transparency; Accountability Plan and in relevant Supplemental The M&E Plan (described in Annex
Transparency and accountability to Agreements. III) will set forth anticipated results and,
MCC and to the beneficiaries are where appropriate, regular benchmarks
1. Background that may be used to monitor
important aspects of the Program and
Projects. Without limiting the generality Armenia’s public road network implementation progress of the Rural
of the foregoing, in an effort to achieve consists of 7,703 km of roads, including Road Rehabilitation Project.
the goals of transparency and 1,561 km of main roads, 1,800 km of Performance against these benchmarks
accountability, the Government shall secondary roads (referred to in Armenia and the overall impact of the Rural Road
ensure that MCA-Armenia: as ‘‘republican’’ roads) and 4,342 km of Rehabilitation Project will be assessed
(a) Establishes an e-mail suggestion local roads. Main and republican roads and reported at regular intervals to be
box as well as a means for other written are managed by the Armenian Road specified in the M&E Plan or otherwise
comments that interested persons may Directorate (‘‘ARD’’) and local roads are agreed by the Parties from time to time.
use to communicate ideas, suggestions managed at the regional (Marz) level. The Parties expect that additional
or feedback to MCA-Armenia; In 2002, the World Bank financed a benchmarks may be identified during
(b) Considers as a factor in its rural infrastructure study which implementation of the Project.
decision-making the recommendations identified a lifeline network (the ‘‘LLN’’) Estimated amounts of MCC Funding for
of the Stakeholders’ Committee; from among the republican and local the Rural Road Rehabilitation Project
(c) Develops and maintains the MCA- roads. The objective was to ensure all are identified in Annex II of this
Armenia Web site in a timely, accurate communities, towns and villages are Compact. Conditions precedent and
and appropriately comprehensive linked to the main road network, either sequencing of the Project shall be set
manner, such MCA-Armenia Web site to directly or through other communities. forth in the Disbursement Agreement or
include postings of information and The resulting network comprises 2703 other relevant Supplemental
documents in English and Armenian km, of which 759 km (28 percent) are Agreements.
and other languages where relevant; and republican roads, and 1943 km (72 (b) Project Implementation. The Rural
(d) Posts on the MCA-Armenia Web percent) are local roads. Road Rehabilitation Project will be
site and otherwise makes publicly The Government is committed to implemented through the ARD, under
available from time to time the bringing the entire LLN up to a the authority of the Ministry of
following documents or information: maintainable standard and ensuring Transport and Communications
(i) The Compact and all Compact sustainable maintenance of this (‘‘MoTC’’). ARD is responsible for
Reports; network. Moreover, the Government has planning, design and construction of all
state owned roads in Armenia and is and has also expressed interest in road under the Compact and will lead the
responsible for the maintenance of all sector investments. effort to find feasible resolutions to
main and republican roads. It has those problems. The ESI Officer will
5. Sustainability
departments for design and tender, convene periodic public meetings to
planning (road survey and economic (a) Institutional Sustainability provide implementation updates and to
evaluation), construction and The Government will ensure identify and address public concerns.
rehabilitation and routine maintenance, continued institutional support of the The Stakeholders’ Committee will also
as well as a road safety group and an on- Project through the passage of appoint representatives of civil society
site laboratory. ARD was the project appropriate legislation establishing the to the Governing Council and provide a
implementation unit for two World LLN as republican roads, placing them link between local NGOs and program
Bank projects in the last 10 years and under the operations and maintenance managers. Environmental and social
has a trained staff and the basic jurisdiction of the ARD. The portion of analyses of the roads will be conducted
technical capacity to implement the the LLN to be rehabilitated with MCC as part of the technical survey and
Project. The Government will establish Funding represents the initial phase of design to determine the environmental
a rural roads coordination unit within the establishment of this network and impacts and existence of economic and
the ARD, staffed with members of the creates a commitment by the physical displacement. In addition to
former project implementation unit Government to build out the rest of the the analyses, environmental
established by the World Bank for its LLN, as well as establish a sustainable management plans (‘‘EMPs’’)
completed transportation project. MCA- maintenance program for the LLN and satisfactory to MCC will be developed,
Armenia will enter into an main road network. The Rural Road implemented and monitored during
Implementing Entity Agreement with Rehabilitation Project will further help project implementation. Disbursement
the ARD that will set out the terms and to institutionalize performance based of MCC Funding will be contingent
conditions for the use of MCC Funding contracts, which were instituted by ARD upon issuance of environmental
in implementing the Rural Road in 2005 and provide a mechanism to licenses, as needed, or any other
Rehabilitation Project. promote local contractors by required permits.
3. Beneficiaries establishing a competitive and reliable 6. Policy, Legal and Regulatory Reforms
contracting environment.
The principal beneficiaries of the The Parties have identified the
Rural Road Rehabilitation Project are (b) Financial Sustainability following policy, legal and regulatory
expected to be approximately 360,000 Financial sustainability is a function reforms and actions that the
Armenians living in 265 rural of the Government’s commitment to Government will pursue in support of
communities connected by the finance necessary annual road the Rural Road Rehabilitation Project to
rehabilitated LLN. Particular maintenance programs for the reach its full benefits. Satisfactory
beneficiaries include: Farmers who use rehabilitated roads. Currently, the implementation of these reforms may be
the improved roads to get products to Government finances approximately conditions precedent to certain MCC
market and to get inputs to production; USD $9 million annually of routine Disbursements as provided in the
users of public transport; and other maintenance on the entire road network. Disbursement Agreement:
travelers. As rehabilitation on the LLN proceeds, (a) The Government will define and
additional resources will be committed adopt into legislation the concept of a
4. Donor Coordination LLN of no less than 2,703 km of roads.
by the Government to cover routine
The Rural Road Rehabilitation Project maintenance on the additional roads. LLN roads are to be defined as those
will complement the rehabilitation and Moreover, the Government will which ensure road access from each
construction of larger roads and other establish a plan for financing periodic community to the main road network.
rural roads recently undertaken by other maintenance so as to ensure the long LLN roads should be classified as
donors. In addition, MCC support to the term sustainability of the entire road republican roads so that the
redefinition and management of the network. In addition, the Government maintenance of the LLN falls under the
LLN will require collaboration and agrees to fund any environmental jurisdiction of the ARD.
coordination with other donors active in mitigation costs associated with the (b) The Government will present an
the road sector. Although the World Rural Road Rehabilitation Project in annual plan for the repair and routine
Bank’s two transportation projects in excess of MCC Funding allocated to maintenance of the entire LLN,
Armenia, the Highway Project and the cover such costs. acceptable to MCC, including the roads
Transport Project, are closed, the World to be rehabilitated with MCC Funding.
Bank takes an active interest in the (c) Environmental and Social (c) The Government will allocate
sustainable maintenance arrangements Sustainability sufficient funds in the budget for
of the roads. Coordination will also The key to ensuring environmental continued rehabilitation of a minimum
continue with the Lincy Foundation, and social sustainability of the Project is of 532 km of the LLN over the Compact
which has completed several main road ongoing public consultation. The Term, with the following minimum
rehabilitation projects and is Environment and Social Impact Officer annual km and threshold expenditure
considering additional ones. Other (‘‘ESI Officer’’) within the Management amounts (actual budgeted in Armenian
donors include: The Japan International Unit will ensure that environmental and Drams (‘‘AMD’’)):
Cooperation Agency which is currently social mitigation measures are followed (i) Fiscal year 2006: 32 km; 1.01
funding a landslide survey; the Kuwait for all Project Activities in accordance billion AMD;
Fund, which is currently considering a with the provisions set forth in this (ii) Fiscal year 2007: 100 km; 3.15
request to fund the rehabilitation of Compact and in relevant Supplemental billion AMD;
rural roads leading to places of Agreements. The ESI Officer will serve (iii) Fiscal year 2008: 100 km; 3.31
historical and tourist significance; and as the point of contact for comments billion AMD;
the Asian Development Bank, which is and concerns of parties affected by the (iv) Fiscal year 2009: 120 km; 3.97
establishing a country office in Armenia implementation of all Project Activities billion AMD; and
(v) Fiscal year 2010: 180 km; 5.95 Project will provide medium and long- (E) Rehabilitation of tertiary canals
billion AMD. term lending to farmers and enterprises utilizing a 15 percent beneficiary co-
(d) The Government will allocate participating in the Project through investment;
funds in the budget for routine registered credit organizations. (2) Rehabilitating additional tertiary
maintenance of the entire Armenian canal systems in up to nine WUAs
road network in amounts at least equal 2. Summary of the Project and Project
Activities utilizing a 15 percent beneficiary co-
to the amounts set out below for the investment and not included in clause
following fiscal years, will expend such The Irrigated Agriculture Project (i)(1)(E) above; and
amounts for their intended purpose, and addresses the physical, managerial and (3) Renovating the drainage system
will make up any budget shortfall from financial investments needed to serving the Ararat Valley production
the prior year’s road maintenance generate sustainable increases in rural systems, including renovating open and
budget: incomes through irrigated agriculture. closed drains, tube wells and artesian
(i) Fiscal year 2006: 5.02 billion AMD; These investments will be implemented wells within 3 sub-regions.MCA-
(ii) Fiscal year 2007: 5.99 billion through two critical activities: Armenia will select individual
AMD; • Improving dilapidated
(iii) Fiscal year 2008: 6.29 billion components or groups of components
infrastructure to expand the land area
AMD; from among the foregoing irrigation
under irrigated production and
(iv) Fiscal year 2009: 6.90 billion schemes for rehabilitation. MCC
improvements to the overall efficiency
AMD; and Funding will be provided to rehabilitate
of sourcing and delivering water to
(v) Fiscal year 2010: 7.36 billion such components, subject to the
member farmers (the ‘‘Infrastructure
AMD. condition that each individual
Activity’’); and
(e) The Government will submit a • Building the management capacities component or group of components
long-term routine and periodic of the WSA and WUAs and providing must:
maintenance plan for the entire road training and access to credit for member • Have an economic rate of return at
network by the end of the third year of farmers to transition to more profitable, least equal to 12.5 percent, calculated in
the Compact Term. market-oriented agriculture (the ‘‘Water- a manner acceptable to MCC and based
to-Market Activity’’). on a feasibility study and final design;
Schedule 2 to Annex I—Irrigated
The M&E Plan (described in Annex • Conform to Government regulations
Agriculture Project
III) will set forth anticipated results and, and MCC’s Environmental Guidelines;
This Schedule 2 describes and where appropriate, regular benchmarks and
summarizes the key elements of the that may be used to monitor • Conform to the World Bank policy
irrigated agriculture project that the implementation progress. Performance on Involuntary Resettlement, where
Parties intend to implement in against these benchmarks and the relevant.
furtherance of the Irrigated Agriculture overall impact of the Irrigated (ii) The Infrastructure Activity will be
Objective (the ‘‘Irrigated Agriculture Agriculture Project will be assessed and implemented through the Water Sector
Project’’). Additional details regarding reported at the intervals to be specified Development and Institutional Project
the implementation of the Irrigated in the M&E Plan or as otherwise agreed Implementation Unit under the
Agriculture Project will be included in by the Parties from time to time. The authority of the State Water Committee
the Implementation Plan and in relevant Parties expect that additional (the ‘‘Irrigation PIU’’). Originally
Supplemental Agreements. benchmarks may be identified during established for the World Bank’s
1. Background the implementation of each Project irrigation projects, the Irrigation PIU has
Activity. Estimated amounts of MCC a trained staff and the basic technical
Armenian agricultural productivity Funding for each Project Activity for
and profitability are constrained by capacity to implement the Infrastructure
this Irrigated Agriculture Project are Activity. MCC Funding will be used to
dilapidated irrigated infrastructure and identified in Annex II of this Compact.
an outdated system characterized by recruit an outside project management
Conditions precedent to each Irrigated advisor to assist the Irrigation PIU.
water losses, inefficient operations and Agriculture Project Activity and
high costs of electric pumping. Farmers MCA-Armenia will enter into an
sequencing of these Project Activities Implementing Entity Agreement with
operate on small plots of land and are shall be set forth in the Disbursement
limited by an underdeveloped market the Irrigation PIU that will set out the
Agreement or other relevant terms and conditions for the use of MCC
economy. In addition, agriculture Supplemental Agreements.
lending in Armenia is at a very low Funding in implementing the
(a) Infrastructure Activity. Infrastructure Activity.
level. Despite this, a reformed (i) MCC Funding will be used to
institutional environment for modern (b) Water-to-Market Activity.
increase the land area under irrigated
irrigation management and agribusiness production and improve the overall (i) The Water-to-Market Activity will
development is emerging at a critical efficiency of sourcing and water ensure that MCC Funding of the
juncture in the post-Soviet era. The delivery to member farmers. This will Infrastructure Activity is sustained
Irrigated Agriculture Project will be done by selectively: through a combination of training,
address the conditions necessary to (1) Rehabilitating infrastructure and technical assistance, access to credit and
achieve higher rural incomes based on equipment for up to 21 regional essential equipment. Under the Water-
irrigated agriculture. It includes irrigation schemes, including: to-Market Activity, MCC Funding will
infrastructure improvements on targeted (A) Conversion of part or all of 15 be used to build management capacities
irrigation schemes, as well as technical schemes from pump to gravity systems; within the WSA and 53 WUAs and
support and training for key actors in improve the ability of member farmers
(B) Construction or rehabilitation of 7

the irrigation sector, namely: The reservoirs; to convert the improved water supply to
national Water Supply Agency (the (C) Rehabilitation of 200 km of main profitable production and pay for water
‘‘WSA’’), the Water User Associations canals; charges through two sub-activities:
(the ‘‘WUAs’’), federations of WUAs and (D) Renovation and resizing of 68 (1) Strengthening Irrigation System
their member farmers. In addition, the pumping stations; and Entities. MCC Funding will be used to:
(A) Support organizational reforms Agricultural Development (‘‘IFAD’’) has Agriculture Project will benefit from an
and institutional strengthening of the also contributed to the sector under the extensive Water-to-Market Activity
WSA; latter two World Bank projects, as well which will provide organizational
(B) Build administrative and as its own Agriculture Research Project. support for the WSA reforms,
operational capacity of the WUAs and Regarding improvements in WUA management capacity building of the
the developing federations of WUAs; members’ capacity to pay for water WUAs and developing regional
and services, the World Bank is initiating a federations of WUAs, and guidance for
(C) Support the establishment of a loan package to support the agricultural the formation of a professional irrigation
professional irrigation association. sector called the Rural Enterprise and association. Technical assistance will be
(2) Improving the Profitability of Small-Scale Commercial Agriculture targeted to ensure that the WSA, WUAs
WUA Member Farmers. MCC Funding Development Project. IFAD is also
will be used to: and federations of WUAs have systems
extending a loan focusing on providing to effectively manage and finance their
(A) Provide member farmers with credit, grants and training to rural
access to technology and training in on- operations. In addition, credit
enterprises in communities of
farm water management and higher organizations will receive training and
mountainous regions. Coordination with
value agricultural production; the World Bank and IFAD programs is capital to expand financial services
(B) Provide training and consulting to advantageous in the following areas: (i) targeted at WUA member farmers.
individual member farmers, farmer The phase-out of the Government’s (b) Financial Sustainability
groups and small and medium subsidy policies and establishment of
enterprises on post-harvest, processing effective cost recovery mechanisms; (ii) Armenia’s irrigation system has
and marketing investments; and the co-financing contributions by the suffered from a lack of resources for
(C) Build capacity within credit WUAs to capital investments in the maintenance. The Irrigated Agriculture
organizations and provide funding to tertiary canal system; (iii) institutional Project aims to address this problem,
such credit organizations which will on- strengthening; and (iv) technical and which has led to the degradation of the
lend to member farmers and related marketing support programs for member system over time.
enterprises. farmers.
(ii) The sub-activity to strengthen First, the Irrigated Agriculture Project
(b) USAID and USDA. USAID is
irrigation system entities will be is designed to rely less on pumping
currently funding a Water Management
managed in the Irrigation PIU. The sub- Program that focuses on national water systems and more on gravity-based
activity to improve profitability of WUA policy (including drinking water) and irrigation, which should decrease
member farmers will be managed by an the institutional framework for that energy costs. However, to the extent
Outside Project Manager to be selected policy. The Government and MCA- pumping systems will be rehabilitated,
through a competitive international Armenia will align policy reform and the Government will present an
tender process. support to the WSA and WUAs through adequate plan for coverage of operations
3. Beneficiaries this program’s progress and insights. and maintenance costs, including
The USAID-supported Armenia SME depreciation, before MCC Funding will
The beneficiaries of the Irrigated be disbursed for civil works on these
Market Development Project will
Agriculture Project will be the 53 WUAs systems.
continue to support agribusiness,
and their approximately 250,000
textiles and stone-work enterprises until Second, the institutional
member farmers who will benefit from
September 2006, and the Micro strengthening of the WUAs under the
more efficient and reliable irrigation
Enterprise Development Initiative Water-to-Market Activity will also
water and intensive institutional
provides management consulting increase the capacity of WUAs to
strengthening. Among these member
services to financial institutions and finance themselves through member
farmers, an estimated 60,000 will be
business service providers also until contributions and water charges.
reached with on-farm water
September, 2006. United States Investing in human capacities (farmers’
management techniques. At least 30,000
Department of Agriculture (‘‘USDA’’) technical and management skills and
member farmers will be reached with
funding supports the Center for approach toward the market) to
transition to higher value agriculture
Agribusiness and Rural Development to transform their enterprises to be
technology. A further subset of an
develop value-adding enterprises profitable by competing in commercial
estimated 15,000 member farmers will
producing high quality product to meet
be reached with modern post-harvest, markets significantly contributes to the
market demand. The USAID and USDA
processing and marketing techniques. financial sustainability of the irrigation
programs represent economic
Some 300 enterprises involved with system. Improved capacity of credit
development approaches that will be
post-harvest, processing and marketing organizations to on-lend to rural
complemented by MCA-Armenia’s
are expected to benefit leading to borrowers will be sustained and
support to WUA member farmers and
significant additional job creation. expanded as new profit opportunities in
related enterprises.
4. Donor Coordination the value chain emerge.
5. Sustainability
The Irrigated Agriculture Project Third, the Government will continue
builds upon and complements an (a) Institutional Sustainability its policy of WUA co-financing of
extensive body of work by several The Government has taken substantial tertiary canals consistent with the
donors in irrigation and agriculture. steps to strengthen the institutional World Bank IDP and will implement
(a) World Bank and IFAD. The World framework for rural development. The such co-financing in a manner
Bank has contributed to the irrigation management of Armenia’s irrigation satisfactory to MCC. In addition, the
sector through three operations: the system has recently been decentralized Government agrees to fund any
Irrigation Dam Safety Projects I and II; to 53 regional WUAs. The Government environmental mitigation costs
the Irrigation Development Project (the has enhanced water management associated with the Irrigated Agriculture
‘‘IDP’’); and the Irrigation Rehabilitation efficiency by merging responsibilities Project in excess of MCC Funding
Project. The International Fund for for irrigation and drainage. The Irrigated allocated to cover such costs.
(c) Environmental and Social will adopt appropriate legislation and/ the sector and data collection
Sustainability or regulations required by the Water procedures.
The key to ensuring environmental Code of 2002 to establish a national (i) The Central Banking Authority will
and social sustainability of the Project is policy on irrigation that will govern the modify the regulatory framework for the
ongoing public consultation. The ESI relationships among the State licensing of MFIs as credit
Officer within the Management Unit Committee of Water Economy, the WSA, organizations.
will ensure that environmental and WUAs and the federations of WUAs.
(d) The Government will use its best (j) In an effort to ensure that the
social mitigation measures are followed
efforts to ensure that water charges councils of the Water User Associations
for all Project Activities in accordance
collected from WUAs continue towards are more representative of their
with the provisions set forth in this
the goal of full recovery of operations constituencies, the Government will
Compact and in relevant Supplemental
Agreements. The ESI Officer will serve and maintenance costs. During the adopt the amendment of Article 16 of
as the point of contact for comments Compact Term, at least the following the Law on Water User Associations and
and concerns of parties affected by the percentages of annual operations and Federations of Water User Associations
implementation of all Project Activities maintenance costs will be covered: proposed by the Government on
and will lead the effort to find feasible (i) 2006: 46 percent; September 13, 2005.
resolutions to those problems. The ESI (ii) 2007: 55 percent; (k) The Government will allocate in
Officer will convene periodic public (iii) 2008: 60 percent; its budget and expend amounts
meetings to provide implementation (iv) 2009: 66 percent; and satisfactory to MCC to fund the
updates and to identify and address (v) 2010: 70 percent. activities of the National Statistical
public concerns. The Stakeholders’ These percentages will be calculated Service, including conducting the
Committee will also appoint in a manner acceptable to MCC Integrated Survey of Living Standards
representatives of civil society to the according to the following formula: WC/ and the Community Survey. These
Governing Council and provide a link SC. surveys will be used by MCC as a key
between local NGOs and program WC = Actual water charges collected monitoring indicator and for impact
managers. during the most recently completed evaluations. Funding by the
ESIAs of the Irrigated Agriculture fiscal year as reported by the Board of Government should increase year-to-
Project will be conducted as part of the WUAs and federations of WUAs year to ensure sustainability post-
technical survey and design. EMPs pursuant to the Law on Water User Compact.
satisfactory to MCC will be developed, Associations and Federations of Water
implemented and monitored during User Associations. Annex II—Financial Plan Summary
project implementation. Should the SC = Operations and maintenance
issue of involuntary resettlement arise, This Annex II to the Compact (the
costs for the most recently completed ‘‘Financial Plan Annex’’) summarizes
the Irrigated Agriculture Project will be fiscal year of the WSA and the WUAs
conducted in compliance with the the Multi-Year Financial Plan for the
as reported by the Board of WUAs and Program. Except as defined in this
World Bank Policy on Involuntary federations of WUAs pursuant to the
Resettlement. To maximize the positive Financial Plan Annex, each capitalized
Law on Water User Associations and
social impacts of the Project, the term in this Financial Plan Annex shall
Federations of Water User Associations.
Implementing Entities for the Water-to- have the same meaning given such term
(e) The Government will allocate
Market Activity will ensure that women elsewhere in this Compact.
funds to cover rehabilitation of the
are adequately represented in the groups irrigation system in at least the amounts 1. General
targeted for assistance. specified in the recommendation of the
6. Policy Actions; Legislative and Technical Commission on Water System A multi-year financial plan summary
Regulatory Reform Operation and Maintenance, excluding (‘‘Multi-Year Financial Plan Summary’’)
any amounts provided for rehabilitation is attached hereto as Exhibit A. By such
The Parties have identified the time as specified in the Disbursement
by MCC Funding.
following policy actions and legislative Agreement, MCA-Armenia will adopt,
and regulatory reforms that the (f) The Technical Commission on
Water System Operation and subject to MCC approval, a Multi-Year
Government will pursue in support of Financial Plan that includes, in addition
the Irrigated Agriculture Project to reach Maintenance will make a
recommendation with respect to the to the multi-year summary of
its full benefits. Satisfactory anticipated estimated MCC Funding and
implementation of these reforms may be overall costs to cover depreciation of the
irrigation system. The Government will the Government’s contribution of funds
conditions precedent to certain MCC
ensure that such depreciation costs are and resources, an estimated draw-down
Disbursements as provided in the
reflected in its annual budgets rate for the first year of the Compact
Disbursement Agreement:
(a) The Government will arrange for throughout the life of the Program based on the achievement of
15 percent WUA co-financing of Assets. performance milestones, as appropriate,
investments in tertiary canal systems (g) Before the end of the 18th month and the satisfaction or waiver of
consistent with the World Bank IDP and of the Compact Term, the Government conditions precedent. Each year, at least
will implement such co-financing in a will develop and adopt legislation and/ 30 days prior to the anniversary of the
manner satisfactory to MCC. or regulations, or amend existing Entry into Force, the Parties shall
(b) Before the end of the second legislation and regulations, to facilitate mutually agree in writing to a Detailed
quarter of the second year of the the establishment of agricultural Financial Plan for the upcoming year of
cooperatives. the Program, which shall include a more
Compact Term, the Government will

adopt and implement a plan acceptable (h) By the end of the first year of the detailed plan for such year, taking into
to MCC for the restructuring of the Compact Term, the Government will account the status of the Program at
WSA. develop and adopt legislation and/or such time and making any necessary
(c) Before the end of the second year regulations to improve statistics on adjustments to the Multi-Year Financial
of the Compact Term, the Government agriculture, including an accounting of Plan.
2. Implementation and Oversight event shall the Government’s Objectives, (ii) does not cause the
The Multi-Year Financial Plan and contribution of resources be less than amount of MCC Funding to exceed the
each Detailed Financial Plan shall be the amount, level, type and quality of aggregate amount specified in Section
implemented by MCA-Armenia, resources required to effectively carry 2.1(a) of this Compact, and (iii) does not
consistent with the approval and out the Government Responsibilities or cause the Government’s obligations or
oversight rights of MCC and the any other responsibilities or obligations responsibilities or overall contribution
Government as provided in this of the Government under or in of resources to be less than specified in
Compact, the Governance Agreement furtherance of this Compact. Section 2.2(a) of this Compact, this
and the Disbursement Agreement. Annex II or elsewhere in the Compact.
4. Modifications
3. Estimated Contributions of the Parties 5. Conditions Precedent; Sequencing
The Parties recognize that the
The Multi-Year Financial Plan anticipated distribution of MCC MCC Funding will be disbursed in
Summary identifies the estimated Funding between and among the tranches. The obligation of MCC to
annual contribution of MCC Funding for various Program activities and Project approve MCC Disbursements and
Program administration, monitoring and and Project Activities will likely require Material Re-Disbursements for the
evaluation, and each Project. The adjustment from time to time during the Program and each Project is subject to
Government’s contribution of resources Compact Term. In order to preserve satisfactory progress in achieving the
to Program administration, monitoring flexibility in the administration of the Objectives and on the fulfillment or
and evaluation, and each Project shall Program, the Parties may, upon waiver of any conditions precedent
consist of (i) ‘‘in-kind’’ contributions in agreement of the Parties in writing and specified in the Disbursement
the form of Government Responsibilities without amending the Compact, change Agreement for the relevant Program
and any other obligations and the designations and allocations of activity or Project or Project Activity.
responsibilities of the Government funds between Program administration The sequencing of Projects or Project
identified in this Compact, including and a Project, between one Project and Activities and other aspects of how the
contributions identified in the notes to another Project, between different Parties intend the Projects to be
the Multi-Year Financial Plan Summary activities within a Project, or between a implemented will be set forth in the
and (ii) such other contributions or Project identified as of the Entry into Implementation Plan, including Work
amounts as may be identified in Force of this Compact and a new Plans for the applicable Project, and
relevant Supplemental Agreements Project, without amending the Compact; MCC Disbursements and Re-
between the Parties or as may otherwise provided, however, that such Disbursements will be disbursed
be agreed by the Parties; provided, in no reallocation (i) is consistent with the consistent with that sequencing.
EXHIBIT A.—MULTI-YEAR FINANCIAL PLAN SUMMARY

Component Year 1 Year 2 Year 3 Year 4 Year 5 Total
1. Rural Road Rehabilitation Project:

A. Infrastructure Improvements ............................................ $0.49 $17.92 $22.62 $13.46 $10.00 $64.50
B. Technical Audit of Performance Based Maintenance
Contracts ........................................................................... .................. .................. 0.30 .................. .................. 0.30
C. Road Maintenance Strategic Plan ................................... .................. .................. .................. 0.30 .................. 0.30
D. Project Administration ...................................................... 0.40 0.40 0.40 0.40 0.40 2.00
Sub-Total .............................................................................. 0.89 18.32 23.32 14.16 10.40 67.10
2. Irrigated Agriculture Project:

A. Infrastructure Activity
Infrastructure* ................................................................ 5.31 30.16 32.07 25.17 15.87 108.59
Project Administration .................................................... 0.93 0.93 0.93 0.93 0.93 4.67
B. Water-to-Market Activity
Institutional Strengthening ............................................. 0.53 0.98 1.45 0.69 0.51 4.16
Improved Profitability of WUA Members ....................... 0.74 4.55 6.14 6.99 7.07 25.50
Project Administration .................................................... 0.72 0.61 0.64 0.41 0.39 2.76
Sub-Total .............................................................................. 8.24 37.24 41.23 34.20 24.77 145.67
3. Monitoring and Evaluation ....................................................... 1.44 0.92 0.95 0.97 0.81 5.08
4. Program Administration and Control:
A. Program Administration .................................................... 1.41 0.99 1.06 1.06 1.09 5.60
B. Audit ................................................................................. 0.17 0.80 0.93 0.71 0.52 3.13
C. Fiscal Management .......................................................... 0.49 2.33 2.70 2.04 1.50 9.06
Sub-Total .............................................................................. 2.06 4.12 4.69 3.81 3.11 17.79
MCC Contribution ................................................................. 12.63 60.61 70.20 53.13 39.09 235.65

*Tertiary canals will be subject to a 15% farmer co-financing requirement.
Annex III—Description of the M&E Plan components of the M&E Plan for the M&E Annex shall have the same
Program. Except as defined in this M&E meaning given such term elsewhere in
This Annex III to the Compact (the Annex, each capitalized term in this this Compact.
‘‘M&E Annex’’) generally describes the
1. Overview 2. Monitoring Component success in meeting each of the

To monitor progress toward the Objectives, including results for the
MCC and the Government (or a intended beneficiaries identified in
mutually acceptable Government achievement of the Objectives and
Outcomes, the Monitoring Component accordance with Annex I (collectively,
Affiliate or Permitted Designee) shall the ‘‘Beneficiaries’’). Third, intermediate
of the M&E Plan shall identify (a) the
formulate, agree to and the Government Indicators (each, an ‘‘Outcome
Indicators, (b) the party or parties
shall implement, or cause to be Indicator’’) will measure the
responsible, the timeline, and the
implemented, an M&E Plan that intermediate results achieved under
instrument for collecting data and
specifies (1) how progress toward the reporting on each Indicator to MCA- each of the Project Activities to provide
Objectives and the intermediate results Armenia, and (c) the method by which an early measure of the likely impact of
of each Project and Project Activity set the reported data will be validated. the Project Activities. A fourth level of
forth in this M&E Annex (the (a) Indicators. The M&E Plan shall Indicators (each, an ‘‘Output Indicator’’)
‘‘Outcomes’’) will be monitored (the measure the results of the Program using will be included in the M&E Plan to
‘‘Monitoring Component’’), (2) a quantitative, objective and reliable data measure the direct outputs of the Project
methodology, process and timeline for (‘‘Indicators’’). Each Indicator will have Activities. All Indicators will be
the evaluation of planned, ongoing, or one or more expected results that
completed Projects and Project disaggregated by gender, income level
specify the expected value and the and age, to the extent practicable.
Activities to determine their efficiency, expected time by which that result will
effectiveness, impact and sustainability Subject to prior written approval from
be achieved (each, a ‘‘Target’’). The
(the ‘‘Evaluation Component’’), and (3) MCC, MCA-Armenia may add Indicators
M&E Plan will measure and report on
other components of the M&E Plan or refine the Targets of existing
Indicators at four levels. First, the
described below. Information regarding Indicators.
Indicators for the Compact Goal (each,
the Program’s performance, including a ‘‘Compact Goal Indicator’’) will (i) Compact Goal Indicators. The M&E
the M&E Plan, and any amendments or measure the results for the overall Plan shall contain the Compact Goal
modifications thereto, as well as Program. Second, the Indicators for each Indicators listed in the table below with
periodically generated reports, will be Objective (each, an ‘‘Objective their definitions. The corresponding
made publicly available on the MCA- Indicator’’) will measure the final Targets to be achieved are in the
Armenia Web site and elsewhere. results of the Projects to monitor their following tables.
COMPACT GOAL INDICATORS

Purpose Indicator Definition of indicator
Reduced rural poverty ..................... Poverty rate in rural areas ............. Poverty rate in rural areas as measured by the National Statistical
Service of Armenia.
Increased economic performance of Change in real income from agri- Change in real income from sale of agricultural produce per house-
the agricultural sector. culture in rural areas. hold member measured as an index.
COMPACT GOAL TARGETS

Year 4 Year 5 Year 6 Year 7 Year 8
Indicators Baseline 2009 2010 2011 2012 2013
Poverty rate in rural areas (percentage) .........................

Baseline: 2004 32 31 30 29 28 26
Change in real income from agriculture in rural areas
(Index) ..........................................................................
Baseline: 2005 = 100 100 102 105 109 115 123
(ii) Objective and Outcome Indicators. in the tables below, with their to be achieved are in the tables
The M&E Plan shall contain the definitions. The corresponding Targets following the definitions.
Objective and Outcome Indicators listed
RURAL ROAD REHABILITATION PROJECT INDICATORS

Objective:
Better access to economic and social in- Satisfaction with public transportation in rural Percentage satisfied.
frastructure. areas.
Outcomes:
Reduced transportation costs ..................... International Roughness Index (IRI) for roads Weighted index to measure road roughness
in Project area. (correlated with transportation costs).
Increased vehicular activity ........................ Average daily traffic in Project area ................. Average daily number of vehicles on road
sections in Project area weighted by length
of corresponding road sections.
RURAL ROAD REHABILITATION PROJECT INDICATORS—Continued

Sustained maintenance of road network .... Government budgetary allocations for rehabili- State budget expenditure on rehabilitation of
tation of road sections in the road lifeline road sections in the road lifeline network
network. (AMD in millions).
Government budgetary allocations for routine State budget expenditures on routine mainte-
maintenance of the entire road network. nance of the entire road network (AMD in
millions).
RURAL ROAD REHABILITATION PROJECT TARGETS

Objective level indicators
(metric of project success observable by Baseline Year 1 Year 2 Year 3 Year 4 Year 5
end of compact)
Satisfaction with public transportation in

rural areas (percentage) 1 .................... TBD TBD TBD TBD TBD TBD
Outcome Level Indicators
(early Indicators of Project Activities im-
pact on Objectives)
International Roughness Index (IRI) for
roads in Project area (m/km) ............... 9.3 9.9 10.2 7.7 5.7 5.0
Average daily traffic in Project area (ve-
hicles) ................................................... 380 390 400 410 440 460
Government budgetary allocations for re-
habilitation of road sections in the road
lifeline network (AMD in millions) ......... n/a 1,010 3,150 3,310 3,970 5,950
Government budgetary allocations for
routine maintenance of the entire road
network (AMD in millions) .................... n/a 5,020 5,990 6,290 6,900 7,360
1 The
Targets for this Indicator will be calculated using baseline information from the 2007 Integrated Survey of Living Standards (ISLS) to be
conducted by the National Statistical Service of the Republic of Armenia.
IRRIGATED AGRICULTURE PROJECT INDICATORS

Purpose Indicator Definition of indicators
Objectives:
Increased agricultural productivity .............. Increase in area covered by high value added Increase in hectares covered by HVA crops
(‘‘HVA’’) crops. (i.e., vegetables, potato, fruits, grapes).
Improved quality of irrigation ...................... Share of respondents satisfied with irrigation Percentage of respondents satisfied with irri-
services. gation services.
INFRASTRUCTURE ACTIVITY INDICATORS

Outcomes:
Increased irrigated land .............................. Additional land irrigated under Project ............. Annual increase in irrigated land in Project
area (hectares).
Maintenance of irrigation system ............... Government budgetary allocations for mainte- State budget expenditures on maintenance of
nance of irrigation system. irrigation system (AMD in millions).
Reduced energy costs ................................ Annual energy savings under Project .............. Reduction in Kilowatt hours used (thousand
KWh).
Reduced water losses ................................ Water losses in primary canals under Project Share of water losses compared to total water
intake (percentage).
Water losses in tertiary canals under Project .. Share of water losses compared to total water
intake (percentage).
WATER-TO-MARKET ACTIVITY INDICATORS

Outcomes:
Improved WUA cost recovery .................... Recovery of WUA operations and mainte- Share of WUA water charges compared WUA
nance cost by water charges. annual operations and maintenance cost
(percentage).
Farmers using improved on-farm water Number of farmers using better on-farm water Number of farmers using better on-farm water
management. management. management: Drip irrigation; ET Gage, and
soil moisture monitoring.
WATER-TO-MARKET ACTIVITY INDICATORS—Continued

Access to credit to improve agricultural ac- Loans provided ................................................. Loans provided under the Project (USD in
tivities. thousands).
IRRIGATED AGRICULTURE PROJECT TARGETS

Objective level indicators
(metric of project success observable by end of Baseline Year 1 Year 2 Year 3 Year 4 Year 5
compact)
Increase in area covered by high value added 0 .................. 0 .................. 110 .............. 1,100 ........... 4,020 ........... 2,540.
(HVA) crops (hectares).
Share of respondents satisfied with irrigation serv- TBD ............. TBD ............. TBD ............. TBD ............. TBD ............. TBD.
ices (percentage) 1.
Infrastructure Activity: Outcome Level Indicators .. Baseline ...... Year 1 ......... Year 2 ......... Year 3 ......... Year 4 ......... Year 5.
(Early Indicators of Project Activities impact on
Objectives).
Additional land irrigated under Project (hectares) 0 .................. 0 .................. 0 .................. 2,400 ........... 10,900 ......... 20,340.
Government budgetary allocations for mainte- TBD ............. TBD ............. TBD ............. TBD ............. TBD ............. TBD.
nance of irrigation system (AMD in millions) 2.
Annual energy savings under Project (thousand 0 .................. 0 .................. 0 .................. 0 .................. 2,800 ........... 25,520.
KWh).
Water losses in primary canals under Project (per- 28% ............. 30% ............. 31% ............. 28% ............. 23% ............. 17%
centage).
Water losses in tertiary canals under Project (per- TBD ............. TBD ............. TBD ............. TBD ............. TBD ............. TBD.
centage) 3.
Water-to-Market Activity: Outcome Level Indica- Baseline ...... Year 1 ......... Year 2 ......... Year 3 ......... Year 4 ......... Year 5.
tors.
(Early Indicators of Project Activities impact on
objectives).
Recovery of WUA operations and maintenance n/a ............... 46% ............. 55% ............. 60% ............. 66% ............. 70%.
cost by water charges (percentage).
Number of farmers using improved on-farm water 0 .................. 0 .................. 5,390 ........... 14,300 ......... 24,900 ......... 35,420.
management (number; cumulative).
Loans provided (USD in thousands) ...................... 0 .................. 0 .................. 1,600 ........... 2,400 ........... 2,500 ........... 2,000.
1 TheTargets for this Indicator will be calculated using baseline information from the 2007 Integrated Survey of Living Standards (ISLS) to be
conducted by the National Statistical Service of the Republic of Armenia.
2 The Targets for this Indicator will be available at the end of the second quarter of 2006, when the recommendations of the Technical Com-
mission on Water System Operation and Maintenance are due for Government confirmation.
3 The Targets for this Indicator will be incorporated once individual WUAs agree to the 15% co-financing required to proceed with the invest-
ments in tertiary canals.
(b) Data Collection and Reporting. The or as otherwise requested by MCC, the Activities to determine their efficiency,
M&E Plan shall establish guidelines for quality of the data gathered through the effectiveness, impact and sustainability.
data collection and a reporting M&E Plan shall be reviewed to ensure This component should use state-of-the-
framework, including a schedule of that data reported are as valid, reliable, art methods for addressing selection
Program reporting and responsible and timely as resources will allow. The bias and should make provisions for
parties. The Management Unit shall objective of any data quality review will collecting data from both treatment and
conduct regular assessments of program be to verify the quality and the control groups, where practicable. The
performance to inform MCA-Armenia consistency of performance data, across Evaluation Component shall contain
and MCC of progress under the Program different implementation units and two types of reports: Final Evaluations
and to alert these parties to any reporting institutions. Such data quality and Ad Hoc Evaluations, and shall be
problems. These assessments will report reviews also will serve to identify where finalized before any MCC Disbursement
the actual results compared to the those levels of quality are not possible, or Re-Disbursement for specific Program
Targets on the Indicators referenced in given the realities of data collection. activities or Project Activities.
the Monitoring Component, explain The data quality reviewer shall enter (a) Final Evaluation. MCA-Armenia,
deviations between these actual results into an Auditor / Reviewer Agreement with the prior written approval of MCC,
and Targets, and in general, serve as a with MCA-Armenia in accordance with may engage an independent evaluator to
management tool for implementation of Annex I. conduct an evaluation at the expiration
the Program. With respect to any data or or termination of the Compact Term
3. Evaluation Component (‘‘Final Evaluation’’) or at MCC’s
reports received by MCA-Armenia,
MCA-Armenia shall promptly deliver The Program shall be evaluated on the election, MCC may engage such
such reports to MCC along with any extent to which the interventions independent evaluator. The Final
other related documents, as specified in contribute to the Compact Goal. The Evaluation must at a minimum (i)
the M&E Plan or as may be requested Evaluation Component shall contain a evaluate the efficiency and effectiveness
from time to time by MCC. methodology, process and timeline for of the Program; (ii) estimate,
(c) Data Quality Reviews. From time analyzing data in order to assess quantitatively and in a statistically valid
to time, as determined in the M&E Plan planned, ongoing, or completed Project way, the causal relationship between
the Compact Goal (to the extent contesting an MCC determination with amendments or modifications thereto or
possible), the Objectives and Outcomes; respect to a Project or Project Activity or any additional components of the M&E
(iii) determine if, and analyze the to seek funding from other donors, no Plan will be presented to the
reasons why, the Compact Goal, MCC Funding or MCA-Armenia Stakeholders’ Committee at appropriate
Objectives and Outcomes were or were resources may be applied to such subsequent meetings of the
not achieved; (iv) identify positive and evaluation or special study without Stakeholders’ Committee. The
negative unintended results of the MCC’s prior written approval. Stakeholders’ Committee will have
Program; (v) provide lessons learned 4. Other Components of the M&E Plan opportunity to present its suggestions to
that may be applied to similar projects; the M&E Plan, which the Governing
(vi) assess the likelihood that results In addition to the Monitoring and Council will take into consideration in
will be sustained over time; and (vii) Evaluation Components, the M&E Plan its review of any amendments to the
any other guidance and direction that shall include the following components M&E Plan during the Compact Term.
will be provided in the M&E Plan. To for the Program, Projects and Project
Activities, including, where (c) MCC Disbursement and Re-
the extent engaged by MCA-Armenia, Disbursement for a Project Activity. As
such independent evaluator shall enter appropriate, roles and responsibilities of
the relevant parties and Providers: a condition to each MCC Disbursement
into an Auditor/Reviewer Agreement or Re-Disbursement there shall be
with MCA-Armenia in accordance with (a) Costs. A detailed cost estimate for
all components of the M&E Plan. satisfactory progress on the M&E Plan
Annex I. for the relevant Project or Project
(b) Assumptions and Risks. Any
(b) Ad Hoc Evaluations. Either MCC assumptions and risks external to the Activity, and substantial compliance
or MCA-Armenia may request ad hoc or Program that underlie the with the M&E Plan, including any
interim evaluations or special studies of accomplishment of the Objectives and reporting requirements.
Projects, Project Activities, or the Outcomes; provided, such assumptions (d) Modifications. Notwithstanding
Program as a whole prior to the and risks shall not excuse performance anything to the contrary in the Compact,
expiration of the Compact Term (‘‘Ad of the Parties, unless otherwise including the requirements of this M&E
Hoc Evaluations’’). If MCA-Armenia expressly agreed to in writing by the Annex, MCC and the Government (or a
engages an evaluator, the evaluator will Parties. mutually acceptable Government
be an externally contracted independent
5. Implementation of the M&E Plan Affiliate or Permitted Designee) may
source selected by MCA-Armenia,
modify or amend the M&E Plan or any
subject to the prior written approval of (a) Approval and Implementation. component thereof, including those
MCC, following a tender in accordance The approval and implementation of the elements described herein, without
with the Procurement Guidelines, and M&E Plan, as amended from time to amending the Compact; provided, any
otherwise in accordance with any time, shall be in accordance with the such modification or amendment of the
relevant Implementation Letter or Program Annex, this M&E Annex, the M&E Plan has been approved by MCC
Supplemental Agreement. The cost of Governance Agreement, and any other in writing and is otherwise consistent
an independent evaluation or special relevant Supplemental Agreement. with the requirements of this Compact
study may be paid from MCC Funding. (b) Stakeholders’ Committee. The
and any relevant Supplemental
If MCA-Armenia requires an ad hoc completed portions of the M&E Plan
Agreement between the Parties.
independent evaluation or special study will be presented to the Stakeholders’
at the request of the Government for any Committee at the Stakeholders’ [FR Doc. 06–3459 Filed 4–12–06; 8:45 am]
reason, including for the purpose of Committee’s initial meetings, and any BILLING CODE 9210–01–P

Notice: Millenium Challenge Act: Armenia

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Notice: Millenium Challenge Act: Armenia

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Thursday,

April 13, 2006

MILLENNIUM CHALLENGE 1994, Armenia adopted a Rehabilitation Project and an Irrigated

Total* ......................................................................... 12.63 60.61 70.20 53.13 39.09 235.65

ERR for the

B. Consultative Process Issues raised will continue to be by a Stakeholders’ Committee consisting

development and due diligence participation in Compact C. Government Commitment and

Annex II: Financial Plan Summary

Government to implement the Program occurs sooner. Notwithstanding

Supplemental Agreement between the activities funded in whole or in part Parties;

3. Implementation Framework Government shall promptly deliver to following in furtherance of this

(B) Construction or rehabilitation of 7

Compact Term, the Government will

EXHIBIT A.—MULTI-YEAR FINANCIAL PLAN SUMMARY

1. Rural Road Rehabilitation Project:

Sub-Total .............................................................................. 0.89 18.32 23.32 14.16 10.40 67.10

2. Irrigated Agriculture Project:

Sub-Total .............................................................................. 8.24 37.24 41.23 34.20 24.77 145.67

Sub-Total .............................................................................. 2.06 4.12 4.69 3.81 3.11 17.79

MCC Contribution ................................................................. 12.63 60.61 70.20 53.13 39.09 235.65

1. Overview 2. Monitoring Component success in meeting each of the

COMPACT GOAL INDICATORS

COMPACT GOAL TARGETS

Poverty rate in rural areas (percentage) .........................

RURAL ROAD REHABILITATION PROJECT INDICATORS

RURAL ROAD REHABILITATION PROJECT INDICATORS—Continued

RURAL ROAD REHABILITATION PROJECT TARGETS

Satisfaction with public transportation in

IRRIGATED AGRICULTURE PROJECT INDICATORS

INFRASTRUCTURE ACTIVITY INDICATORS

WATER-TO-MARKET ACTIVITY INDICATORS

WATER-TO-MARKET ACTIVITY INDICATORS—Continued

IRRIGATED AGRICULTURE PROJECT TARGETS

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