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



[[Page 43379]]

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Part III





Millennium Challenge Corporation





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

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

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MILLENNIUM CHALLENGE CORPORATION

[MCC FR 07-07]


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

AGENCY: Millennium Challenge Corporation.

ACTION: Notice.

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SUMMARY: In accordance with Section 610(b)(2) of the Millennium 
Challenge Act of 2003 (Pub. L. 108-199, Division D), the Millennium 
Challenge Corporation (MCC) is publishing a summary and the complete 
text of the Millennium Challenge Compact between the United States of 
America, acting through the Millennium Challenge Corporation, and the 
Government of the Kingdom of Lesotho. Representatives of the United 
States Government and the Government of the Kingdom of Lesotho executed 
the Compact documents on July 23, 2007.

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

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

A. Introduction

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

B. Program

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

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

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

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

D. Impacts

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

E. Program Management

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

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

F. Other Highlights

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

G. Sustainability

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

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

H. Donor Coordination

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

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

Table of Contents

Article 1. Goal and Objectives
    Section 1.1 Compact Goal

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

Millennium Challenge Compact

Preamble

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

Article 1. Goal and Objectives

Section 1.1 Compact Goal.

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

Section 1.2 Program Objectives.

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

Article 2. Funding and Resources

Section 2.1 MCC Funding.

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

Section 2.2 Compact Implementation Funding

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

Section 2.3 Disbursement

    In accordance with this Compact and the Program Implementation 
Agreement

[[Page 43385]]

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

Section 2.4 Interest

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

Section 2.5 Government Resources; Budget

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

Section 2.6 Limitations on the Use of MCC Funding

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

Section 2.7 Taxes

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

Article 3. Implementation

Section 3.1 Program Implementation Agreement

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

Section 3.2 Government Responsibilities

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

Section 3.3 Policy Performance

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

[[Page 43386]]

Section 3.4 Government Assurances

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

Section 3.5 Implementation Letters

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

Section 3.6 Procurement

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

Section 3.7 Records; Accounting; Covered Providers; Access.

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

Section 3.8 Audits; Reviews.

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

[[Page 43387]]

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

Article 4. Communications

Section 4.1 Communications.

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

Section 4.2 Representatives

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

Section 4.3 Signatures

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

Article 5. Termination; Suspension; Refunds

Section 5.1 Termination; Suspension

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

[[Page 43388]]

Section 5.2 Refunds; Violation

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

Section 5.3 Survival

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

Article 6. Compact Annexes; Amendments; Governing Law

Section 6.1 Annexes

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

Section 6.2 Inconsistencies

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

Section 6.3 Amendments

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

Section 6.4 Governing Law

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

Section 6.5 Additional Instruments

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

Section 6.6 References to MCC Web site

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

Section 6.7 References to Laws, Regulations, Policies and Guidelines

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

Article 7. Entry Into Force

Section 7.1 Domestic Requirements

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

Section 7.2 Conditions Precedent

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

Section 7.3 Date of Entry into Force

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

Section 7.4 Compact Term

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

[[Page 43389]]

Annex I Program Description

A. Overview

    This Annex I describes the Program that MCC Funding will support in 
Lesotho during the term of this Compact and the results to be achieved 
using MCC Funding. In all cases, an activity described herein will be 
carried out subject to any relevant approvals on the part of MCC and to 
the extent funds are made available under this Compact for purposes of 
that activity.
1. The Program and Its Projects
    The Program will include the Water Sector Project, the Health 
Sector Project, and the Private Sector Development Project as further 
described in this Annex I (the ``Projects'').
    The Parties may agree to modify, amend, terminate or suspend these 
Projects or to create a new project by written agreement signed by the 
Principal Representative of each Party without amending this Compact; 
provided, however, that any such modification or amendment of a Project 
or creation of a new project does not (a) cause the amount of MCC 
Funding to exceed the aggregate amount specified in Section 2.1(a) of 
this Compact, (b) cause the Government's responsibilities or 
contribution of resources to be less than specified in this Compact, or 
(c) extend the term of this Compact.
2. Program Implementation
    The implementation framework for the use of MCC Funding is 
summarized in this Annex I.
    (a) MCC and the Government will sign the Program Implementation 
Agreement, and may sign other agreements contemplated by this Compact, 
all of which, together with this Compact, will set out certain rights, 
responsibilities, duties and other terms relating to the implementation 
of this Compact and the Program.
    (b) The Government will:
    (i) Enact or cause to be enacted an act of Parliament to form the 
entity empowered to implement some or all of the Government's 
obligations or to exercise any rights of the Government as provided 
under the terms of this Compact and the Program Implementation 
Agreement (``MCA-Lesotho''); and
    (ii) Take all necessary and appropriate actions to carry out each 
of the other Government responsibilities in connection with this 
Compact and the Program Implementation Agreement, including, but not 
limited to, the actions necessary to ensure (1) this Compact, the 
Program Implementation Agreement and any other agreement entered into 
in connection with this Compact to which the Government and MCC are 
parties will be given the status of an international agreement and (2) 
no laws of Lesotho, other than the Constitution of Lesotho, whether now 
or hereafter in effect, will take precedence or prevail over the terms 
of this Compact, the Program Implementation Agreement or such other 
agreement.
    (c) MCC will take all necessary and appropriate actions to carry 
out each of its responsibilities in connection with this Compact and 
the Program Implementation Agreement, including the exercise of its 
various approval rights in connection with the implementation of this 
Compact and the Program.
    (d) MCA-Lesotho will take all necessary and appropriate actions to 
implement this Compact and the Program, including the performance of 
the rights and responsibilities designated to it by the Government 
pursuant to the Program Implementation Agreement.
3. Fiscal Accountability
    (a) Fiscal Agent. The Government will ensure that a fiscal agent 
(``Fiscal Agent'') is appointed in accordance with the terms of this 
Compact and the Program Implementation Agreement. The Fiscal Agent will 
provide a broad range of financial management services required by MCA-
Lesotho to implement this Compact and the Program. The Government and 
MCA-Lesotho will take all necessary and appropriate actions to ensure 
the Fiscal Agent performs these services in accordance with the terms 
of this Compact, the Program Implementation Agreement and any 
agreements to which the Fiscal Agent is a party and in accordance with 
internationally accepted standards of accounting and financial 
management. This will include, but not be limited to, the Fiscal 
Agent's responsibilities to collect and report information useful to 
the governing board and senior management of MCA-Lesotho, managers 
charged with supervision of the Projects, MCC and certain other 
entities responsible for the verification of the manner in which MCC 
Funding is used. The roles and responsibilities of the Fiscal Agent 
will be set out in a Fiscal Agent Agreement to be entered into between 
MCA-Lesotho and the Fiscal Agent (the ``Fiscal Agent Agreement''). The 
role of the Fiscal Agent and the terms of the Fiscal Agent Agreement 
are more fully described in the Program Implementation Agreement.
    (b) Permitted Accounts. The Government will ensure that the 
Permitted Accounts are established, and banking services provided, in 
accordance with the terms of this Compact, the Program Implementation 
Agreement and any other agreements related to the Permitted Accounts. 
The Central Bank of Lesotho will not provide banking services to MCA-
Lesotho or otherwise in connection with MCC Funding.
    (c) Procurement Agent. The Government will ensure that a 
procurement agent (the ``Procurement Agent'') is appointed in 
accordance with the terms of this Compact and the Program 
Implementation Agreement. The Procurement Agent will act on behalf of 
MCA-Lesotho to provide specified procurement activities required by 
MCA-Lesotho to implement this Compact and the Program. The Government 
and MCA-Lesotho will take all necessary and appropriate actions to 
ensure the Procurement Agent performs these services in accordance with 
the terms of this Compact, the Program Implementation Agreement, the 
MCC Program Procurement Guidelines and any agreements to which the 
Procurement Agent is a party. The roles and responsibilities of the 
Procurement Agent will be set out in a Procurement Agent Agreement to 
be entered into between MCA-Lesotho and the Procurement Agent.
    (d) Proposals for Goods, Works and Services. Public solicitations 
for proposals are anticipated to procure goods, works and services, as 
appropriate, to implement the Program and its Projects. All such 
procurements will be conducted in accordance with Section 3.6 of this 
Compact. MCA-Lesotho may also consider, using a process approved by MCC 
in writing, any unsolicited proposals it might receive.
4. Management and Consultation Arrangements of MCA-Lesotho
    (a) Board of Directors. MCA-Lesotho will be governed by a board of 
directors that will have independent decision making authority and will 
be the final authority with respect to implementation of this Compact. 
It will make strategic decisions, provide oversight and be responsible 
for the success or failure of the Program. The initial board of 
directors will be comprised of 11 voting members, representing: (i) The 
Ministry of Finance and Development Planning; (ii) the Ministry of 
Foreign Affairs; (iii) the Ministry of Health and Social Welfare; (iv) 
the Ministry of Local Government; (v) the Ministry of Natural 
Resources; (vi) the Ministry of Justice, Human Rights and 
Rehabilitation; (vii) three members from the private sector; and

[[Page 43390]]

(viii) two members from the Lesotho Council of Non-Governmental 
Organizations (``LCNGO''). The members of the board of directors 
representing the private sector will be selected by the stakeholders 
committee (described in clause (c) below) and the members of the board 
of directors representing the LCNGO will be selected by the LCNGO 
through the stakeholders committee, in each case in accordance with a 
process agreed upon by the Government and MCC. A representative of MCC 
and the chief executive officer of MCA-Lesotho will serve as non-voting 
members of the MCA-Lesotho board of directors.
    (b) Management Unit. A management unit will support the board of 
directors in implementing the Program. A chief executive officer will 
manage the day-to-day activities of MCA-Lesotho and will be supported 
by key officers, to include a: (i) Chief financial officer; (ii) head 
of administration; (iii) head of procurement; (iv) head of 
infrastructure; (v) head of environment and social assessment; (vi) 
head of monitoring and evaluation; (vii) head of operations; (viii) 
legal officer; (ix) communications and public outreach specialist; and 
(x) such other key officers as may be agreed upon by the Government and 
MCC. The key officers will be supported by appropriate administrative 
and other personnel deemed to be necessary for implementing the 
Program. The CEO will be selected and hired by the board of directors 
following an open and competitive recruitment and selection process. 
The other key officers and staff will be selected and hired by the CEO 
following an open and competitive recruitment and selection process. 
The appointment of the CEO and all other MCA-Lesotho management unit 
personnel will be subject to MCC's prior approval.
    (c) Stakeholders Committee. A stakeholders committee, in form 
satisfactory to MCC, will be created to represent the constituencies of 
the various Projects. MCA-Lesotho will use the stakeholders committee 
to continue the consultative process throughout Compact implementation. 
The stakeholders committee will be used primarily to inform the various 
constituent groups about Program implementation, provide advice and 
input to MCA-Lesotho concerning the Program, and select the private 
sector members and civil society members of the board of directors.
5. Gender Integration Plan
    MCA-Lesotho will draft, implement and monitor a Program-wide gender 
integration plan (``Gender Integration Plan'') to ensure compliance, 
optimum program design and maximum beneficiary impact across all 
Compact Project activities. This Gender Integration Plan will include, 
as appropriate, recommendations for meaningful and inclusive 
consultations with women and other vulnerable and underrepresented 
groups; project-specific gender analyses; and strategies for 
incorporating findings of the gender analyses into final Project 
designs.
    MCA-Lesotho will also hire a full-time, dedicated social/gender 
specialist for the entire term of this Compact to ensure that social 
safeguards are fully integrated into the design, terms of references, 
work plans and monitoring and evaluation plans, and to ensure that all 
Project activities in every aspect of the Program are compliant with 
the gender policy delivered by MCC to the Government or posted by MCC 
on its Web site or otherwise publicly made available, as the policy may 
be amended from time to time (the ``MCC Gender Policy''), and with the 
rights afforded to married women in the 2006 Legal Capacity of Married 
Persons Act.
6. HIV/AIDS Risk Mitigation Plans
    MCA-Lesotho will assure that all construction contractors develop, 
implement and monitor an HIV/AIDS awareness program acceptable to MCC 
that includes, but is not limited to, the following elements:
    (a) Activities directed to construction laborers and all associated 
formal and informal sector workers engaged in building and supporting 
construction works, including components for those who provide food, 
laundry and any other services providers and sub-contractors;
    (b) Activities directed to the communities affected by the 
construction works;
    (c) Activities designed to be gender and age-appropriate in content 
and delivery, reflecting an analysis of gender differences and 
inequalities to ensure the most effective program to reach various 
stakeholders;
    (d) A component for independent monitoring of contractor 
compliance;
    (e) Testing made available on or near construction sites; and
    (f) Components necessary to ensure the contractor's program is 
coordinated with other HIV/AIDS awareness and prevention programs being 
implemented in Lesotho during the time of construction works.

B. Water Sector Project

1. Summary of Project and Related Activities
    This Project is designed to provide additional access to improved 
water supplies and sanitation facilities for rural and urban domestic, 
commercial and industrial users. In its design, funding under the Water 
Sector Project will be used to (a) construct a conveyance system from 
the Metolong Dam and establish a project management unit to manage the 
implementation, (b) rehabilitate existing infrastructure returning it 
to a functional state and expand the reticulated network to unconnected 
urban and peri-urban areas, (c) provide additional access to improved 
water supply and sanitation facilities in remote, rural areas through 
the rehabilitation and/or construction of up to 250 water supply points 
and up to 10,000 ventilated improved pit (``VIP'') latrines and (d) 
execute a pilot-scale wetlands restoration and conservation program at 
three project areas in the Lesotho highlands.
    In the industrial sector, the Project will provide the critical 
infrastructure necessary to provide additional water to support the 
growth of garment and textile operations--the country's principal 
engine of economic growth and poverty reduction. Currently, Lesotho's 
textile sector accounts for approximately 40 percent of the country's 
gross domestic product and employs nearly 50,000 individuals, many of 
whom support extended families.
    Expansion and rehabilitation of rural water supply and sanitation 
facilities, coupled with public health and hygiene awareness training 
for rural communities, supports the goals of Lesotho's 2004 Poverty 
Reduction Strategy Paper (``PRSP''), which highlights the need for 
investment in rural infrastructure to help foster conditions for 
economic growth and poverty reduction. The wetlands restoration 
activity also supports the goals of the PRSP by helping Lesotho 
conserve and manage natural resources that are vital to sustainable 
development and directly contribute to the livelihoods and well-being 
of Lesotho's poorest people.
    In connection with the Water Sector Project activities, MCA-Lesotho 
will assist and take all necessary steps to ensure that, where and when 
required by MCC Environmental Guidelines, MCC Gender Policy and/or 
Lesotho laws, an environmental impact assessment (each, an ``EIA'') or, 
as applicable, environmental assessment

[[Page 43391]]

(each, an ``EA''), an environmental management plan (each, an ``EMP''), 
an HIV/AIDS awareness plan, and a resettlement action plan (each, a 
``RAP'') or resettlement policy framework (each, a ``RPF'') (consistent 
with World Bank Operational Policy 4.12 on Involuntary Resettlement) 
are prepared to the satisfaction of MCC and in accordance with the 
Lesotho National Environment Act of 2001 and Lesotho Guidelines for 
Environmental Impact Assessment, in each case as the same may be 
amended from time to time. MCA-Lesotho shall also ensure that, for each 
activity requiring an environmental license under the Lesotho National 
Environment Act of 2001, a ``Project Brief'' (as defined in the Lesotho 
National Environment Act of 2001) and any necessary supporting studies 
will be submitted to, and approved by, the Government's environmental 
authorities prior to the initiation of construction activities, and 
that such environmental license will be maintained in good standing 
throughout the Compact Term. MCC Funding will support implementation of 
the environmental and social mitigation measures identified in the 
EIA(s) and/or EA(s), EMP(s), and RAP/RPF(s). The following summarizes 
each Project activity under the Water Sector Project:
    (a) Metolong Dam--Bulk Water Conveyance System and Metolong Program 
Management Unit.
    The Metolong Dam bulk water conveyance system activity involves the 
construction of downstream works for the supply of water to Maseru and 
the neighboring towns of Mazenod, Roma and Morija.
    Furthermore, MCC Funding will support the establishment of an 
independent project management unit, the Metolong Program Management 
Unit (the ``Metolong Program Management Unit'' or ``MPMU''), which will 
act as a dedicated project management unit for the Metolong Dam 
activity, as well as a portion of the estimated costs for environmental 
and social mitigation associated with the Metolong Dam project.
    The construction of downstream works relating to the Metolong Dam 
project includes the following:
    (i) An 800m, 700mm diameter raw water transmission main from the 
dam to a downstream water treatment facility;
    (ii) A 75 ML/day water treatment plant with a peak capacity of 93.8 
ML/day;
    (iii) A transmission system to Maseru that includes:
    (1) A pump station (Ha Seeiso PS) at the WTP with an average 
pumping capacity of 859 l/s (74.25 ML/day) and a peak discharge 
capacity of 1,088 L/S (94 ML/day),
    (2) A break pressure tank on a high ground near the Village of Ha 
Nchela with a capacity of 4ML or 4,000m \3\,
    (3) A 7.54km-700mm transmission main from Ha Seeiso PS (at WTP) to 
the Ha Nchela break pressure tank,
    (4) A 23.5km-800mm gravity main from Ha Nchela break pressure tank 
to the High South Reservoir (``HSR'') outside of Maseru, and
    (5) Expansion of the HSR with two additional storage units, each 
with a capacity of 27ML or 27,000m\3\;
    (iv) Bulk water supply components for Roma and Mazenod, which 
include:
    (1) A 29 l/s booster pump station at Roma,
    (2) A 300mm diameter transmission main toward Roma & Mazenod,
    (3) A 13.5 km, 160mm diameter transmission line for Roma,
    (4) An 8.8 km, 250mm diameter transmission line for Mazenod, and
    (5) 3 ML reservoirs for each town;
    (v) Bulk water supply components for Morija, which include:
    (1) A 25 km, 160mm diameter transmission main between Mazenod & 
Morija,
    (2) A 19 l/s Booster Pump Station at Morija, and
    (3) A 0.5 to 1.0 ML reservoir at Morija;
    (vi) Detailed designs for the Teyateyaneng (``TY'') conveyance 
system, pending successful completion of feasibility studies for TY 
water supply from Metolong (funded by the European Union ); and
    (vii) Implementation of environmental and social mitigation 
measures, including preparation of supplemental studies and management 
plans pertaining to the construction and operation of the bulk water 
conveyance system funded under this Compact, in accordance with the 
requirements of the Metolong Dam Environmental and Social Impact 
Assessment (``ESIA''), EMP, RAP and the MCC Environmental Guidelines.
    (b) Urban and Peri-Urban Water Network Activity.
    The Urban and Peri-Urban Water Network activity involves 
reticulation extensions and infrastructure rehabilitation of the urban 
and peri-urban water network, including reticulation extension to the 
towns of Semonkong and augmented supply to the town of Mazenod.
    This activity includes the following components:
    (i) Infrastructure rehabilitation including the following:
    (1) Reservoir rehabilitation; including repair and replacement of 
existing reservoirs,
    (2) Pipeline rehabilitation; including repair and replacement of 
existing pipelines,
    (3) Water treatment works rehabilitation; including rehabilitation 
and/or replacement of sand filters, pre-settlement tanks and water 
treatment facilities, and
    (4) Other rehabilitation works; including rehabilitation of a 
limited number of boreholes, pump houses and sewer pipes;
    (ii) Reticulation extensions including the following:
    (1) Extensions in Maseru, Mohales' Hoek, Mafeteng, Maputsoe, 
Mokhotlong and Butha-Buthe, and
    (2) Rising main extensions in Mafeteng-Thabaneng;
    (iii) The Semonkong water supply system including the following:
    (1) Rehabilitation of the existing distribution system,
    (2) 15.75 km of transmission pipelines diameter 90 mm PVC,
    (3) 18.4 km of distribution network diameter 32 mm-90 mm PVC,
    (4) Two reservoirs of 990 m \3\ and 424 m \3\ storage capacity,
    (5) Water kiosks,
    (6) One office building and three staff houses,
    (7) Chlorination and nitrates treatment facility,
    (8) Service roads,
    (9) Nine borehole pumps,
    (10) Nine spring pumps,
    (11) 604 house connections, and
    (12) Allowance for additional abstraction with boreholes;
    (iv) Mazenod Reticulation:
    (1) Extension of the existing distribution 250mm pipeline from the 
existing 5ML High South Reservoir that is serving the Maseru southeast 
reticulation system, to a 1ML reservoir in Mazenod for approximately 
5.8km,
    (2) Connection of the airport pump station to an extended pipeline,
    (3) Connection of the Mazenod Reservoir to the existing pipeline 
between the airport pump station and the airport reservoir, and
    (4) Construction of the reticulation system for Mazenod.
    MCC Funding will also support the following preparation activities 
for the urban water supply components:
    (v) Development of detailed design, and specifications that can be 
procured through tendering; and
    (vi) Preparation of environmental ``Project Briefs'' and any 
supporting EA/EIA, EMP, and/or RAP/RPF required to meet MCC 
Environmental Guidelines and environmental licensing requirements under 
the Lesotho National Environment Act of 2001.
    The activity will also support the following components:

[[Page 43392]]

    (vii) Implementation of environmental and social mitigation 
measures pertaining to the construction and operation of urban water 
supply projects funded under this Compact per the requirements of the 
EA/EIA(s), EMP(s), and RAP/RPF(s) referenced above; and
    (viii) Establishment of a small, dedicated project implementation 
unit for the activity (the ``WASA PIU'') within the Lesotho Water and 
Sewerage Authority (``WASA'').
    (c) Rural Water Supply and Sanitation Activity.
    MCC Funding will assist the Government in meeting its goal of 
providing improved water and sanitary services to the entire rural 
population. The total target population impacted by this project is 
150,000 persons. The VIP latrine construction approach is based on 
training and employing local artisans in latrine construction, and then 
providing materials and support to construct latrines with input, both 
in kind and financial, on an individual basis. The activity will be 
managed by an existing project implementation unit, and MCC will 
provide funding for the enhancement of capacity and capability of that 
project implementation unit.
    Specifically, MCC Funding will support the following:
    (i) Construction, rehabilitation, and/or expansion of up to 250 
water systems;
    (ii) Construction of up to 10,000 VIP latrines; and
    (iii) Public health and hygiene awareness training and support.
    MCC Funding will support the following preparation activities for 
the rural water supply and sanitation projects:
    (iv) Preparation of feasibility studies, detailed design, and 
tender documents; and
    (v) Preparation of environmental ``Project Briefs'' and any 
supporting EA/EIA, EMP, and/or RAP/RPF required to meet MCC 
Environmental Guidelines and environmental licensing requirements under 
the Lesotho National Environment Act of 2001.
    Additionally, MCC Funding will support the following:
    (vi) Implementation of environmental and social mitigation measures 
pertaining to the construction and operation of rural water supply and 
sanitation projects funded under this Compact, per the requirements of 
the EA/EIA(s), EMP(s), and RAP/RPF(s) referenced above; and
    (vii) Strengthening of the existing project implementation unit for 
the activity (the ``DRWS PIU'') within the Department of Rural Water 
Supply (``DRWS'') and appointing project coordinators to manage the 
public health and hygiene programs.
    (d) Wetlands Restoration and Conservation Activity.
    The wetlands restoration and conservation activity will help 
Lesotho address widespread overgrazing and degradation of alpine 
wetlands, which are prevalent throughout the highlands of Lesotho and 
are an important ecological and economic resource that naturally 
regulates flow in the Senqu/Orange River Basin and provides livestock 
pasture, medicinal plants, thatch, and other rural livelihood benefits. 
Using MCC Funding, a pilot-scale project will be implemented to design 
and apply restoration measures and examine alternative land management 
prescriptions at three target study areas, including wetlands at 
Khalong-la-Lithunya (Oxbow area), Kotisephola (Sani Pass area), and 
Letseng-la-Letsie (an internationally protected Ramsar site near 
Quithing). In conjunction with the pilot studies, a broad-based 
assessment of Lesotho's wetlands will be undertaken to characterize the 
environmental, social, and economic implications of current management 
practices and to identify potential economic opportunities beyond 
herding. Based on the results of the pilot studies and environmental 
and socio-economic assessment, a strategic action plan will be 
developed that outlines requirements for establishing a national 
watershed management and wetlands conservation program, focusing on 
specific measures to restore degraded wetlands, protect water 
resources, improve and maintain the productivity of highland pastures, 
and promote expanded economic development through community-based 
resource management and conservation programs.
    Specifically, MCC Funding will support the following tasks:
    (i) Establishment of a project implementation unit within the 
Lesotho Department of Water Affairs (i.e., the DWA PIU referred to in 
Section B.2(d) of this Annex I) that will be responsible for executing 
the MCC wetlands restoration and conservation activity;
    (ii) Environmental and social baseline data collection and 
monitoring at each of the three target wetland areas, including 
purchase and installation of field monitoring equipment;
    (iii) Restoration of degraded wetlands and assessment of 
alternative long-term management prescriptions at each of the three 
target wetland areas; and
    (iv) Preparation of a strategic environmental and socio-economic 
assessment (``SEA'') of Lesotho's wetlands that will, as part of its 
primary objectives, provide a basis for establishing a national 
watershed management and wetlands conservation program.
2. Project Implementation
    (a) Metolong Dam--Bulk Water Conveyance Activity.
    The preferred institutional arrangement for delivering the Metolong 
Dam project is within the MPMU with the appropriate staffing, structure 
and business processes to deliver the entire project within the costs 
and schedule objectives of the Government. The MPMU chief executive 
will report through a responsible Government agency project director to 
a Metolong project advisory board representing other donors and key 
stakeholders. The Government's project director will obtain independent 
input from expert panels on dam safety and environmental and social 
responsibility, and report on compliance with donor covenants to the 
funding agencies. The MPMU will house the capability and responsibility 
for delivering both the ancillary bulk water supply components and the 
Metolong Dam itself. In the interest of time and resource 
effectiveness, the MPMU function will be outsourced to a private 
program management or construction management firm, with prior 
successful experience in Africa. An international competitive bidding 
process, using a qualifications and cost-based selection protocol will 
be employed to select this firm.
    (b) Urban and Peri-Urban Water Network Activity.
    WASA will have primary responsibility for the implementation of 
this activity. WASA is a parastatal public corporation which reports to 
the Lesotho Commissioner of Water under the Ministry of Natural 
Resources. The primary responsibility of WASA is to provide potable 
water supplies and sewerage treatment and disposal facilities to the 
urban areas in both the lowlands and the highlands. The WASA PIU will 
be responsible for implementation of this activity.
    (c) Rural Water Supply and Sanitation Activity.
    The DRWS will be responsible for the implementation of this 
activity. Water system design, construction and operation is built 
around the DRWS ``project life cycle'' which is a revolving and 
continuous implementation methodology by which rural water system 
designs are continuously developed at the district level through the 
coordinated efforts of the target community, through their water 
committee and chief and from the DRWS village affairs coordinator,

[[Page 43393]]

district project officer and district engineer. Historically, the 
Ministry of Health and Social Welfare has had the primary 
responsibility for implementing sanitation initiatives, including the 
provision of VIP latrines. However, in line with the Government's 
policy on decentralization, the DRWS will retain responsibility for 
this activity as well.
    (d) Wetlands Restoration and Conservation Activity.
    The wetlands restoration and conservation activity will be 
implemented by the Department of Water Affairs (``DWA''). Compact funds 
will be allocated to staffing a dedicated project implementation unit 
(the ``DWA PIU'') that will work on behalf of, and report to, the head 
of the wetlands management unit within the DWA. The DWA PIU will be 
responsible for managing procurements, coordinating work activities, 
and assuring the work meets the cost, schedule and technical objectives 
of the project. The DWA PIU will work closely with DWA district project 
officers to execute project activities at each of the three target 
wetland sites and will assist the DWA, as necessary, with inter-agency 
coordination, stakeholder engagement, and performance monitoring and 
reporting. International consultants working with local partners will 
be procured to carry out the wetlands restoration and SEA activities. 
The National Wetlands Committee (``NWC''), which consists of 
representatives from various Government agencies, will play an advisory 
role in the implementation of the wetlands restoration and conservation 
activity.
3. Beneficiaries
    The Metolong Dam and Urban Water project activities will include a 
reduction in unaccounted-for-water, increased connections to the urban 
water supply system, and expanded employment in industries that depend 
on a reliable water supply. At the household level, results are 
expected to include a reduction in water-borne diseases through 
increased availability of clean water and sanitation facilities for 
domestic use. The project also will contribute to time savings, which 
could allow time to be used more productively than for collecting 
water. The wetlands restoration activity is expected to improve 
livestock productivity and benefit rural livelihoods in communities in 
the vicinity of the three target wetland areas, while also providing a 
basis for implementation of a national watershed management plan that 
would have much broader environmental, social and economic benefits to 
the country as a whole over the long-term.
4. Donor Coordination; Role of Private Sector and Civil Society
    The Metolong Dam project is being developed in coordination with 
several donors, including the OPEC Fund for International Development, 
the Kuwait Fund for Arab Economic Development, the Arab Bank for 
Economic Development in Africa (BADEA), the Saudi Fund for Development, 
and the World Bank. The European Union has a sustained presence in 
Lesotho's water sector. The European Union is currently funding 
detailed designs for components of the Metolong bulk water conveyance 
system, as well as components of the larger lowlands water supply 
system. The European Investment Bank is currently funding the Greater 
Maseru wastewater improvement project.
    The World Bank has been an active development partner in Lesotho's 
water sector, primarily through the 2004 Lesotho Water Sector 
Improvement Project. Performance benchmarks, as defined in the Water 
Sector Improvement Project, will be monitored against, and in some 
cases will be linked to, Disbursements for this activity.
    Irish Aid has been the only active donor in Lesotho's rural water 
supply and sanitation sub-sectors. Through Irish Aid, a total of 
[euro]2.35 million was disbursed during 2005 for continued 
implementation of the DRWS five-year strategic plan. Outputs included 
the maintenance of 626 hand pumps and over 15 villages were provided 
with new tapped water sources. Fifty-five more sources were designed 
and are now under construction. Finally, the DRWS's new maintenance 
strategy was implemented over the course of the year with the 
inspection of 1,786 existing waster systems.
5. USAID
    USAID currently has no water sector projects within Lesotho.
6. Sustainability
    Sustainability of the Water Sector Project activities is dependent 
upon the Government's pace of implementation of water sector policy 
reforms. Institutional reform and establishment of a regulatory regime, 
both of which are critical to sustainability, are expected to be 
completed in the second year of the Compact Term. Disbursements of MCC 
Funding will be tied to agreed progress on specific salient components 
of the water sector reforms.
    The estimated additional annual budget requirement to meet the 
increase in operations and maintenance cost is: US$2,850,000 for the 
Metolong Dam Project activity and US$820,000 for the Urban and Peri-
Urban Water Network activity. Financial sustainability, at a minimum, 
will depend on the ability of WASA to independently cover the 
incremental budget requirement for the additional operations and 
maintenance. With an effective annual tariff increase of five percent, 
revenues generated by WASA are expected to fully cover operations and 
maintenance cost and the assumed costs of Metolong raw water within the 
period of this Compact.
    This Compact provides funding for capacity building and technical 
assistance to WASA, DRWS and the DWA to facilitate the implementation 
and long-term management capabilities of these institutions.
    The most critical component of environmental and social 
sustainability of the Water Sector Project is implementation of long-
term environmental management and monitoring plans, including on-going 
public outreach and other social impact mitigation measures, in 
accordance with project-specific EIAs, EMPs, and, where necessary, RAPs 
or RPFs. Disbursements of MCC Funding will be conditioned on the 
Government completing each of these studies to the satisfaction of MCC 
prior to construction and then demonstrating continued compliance with 
applicable EMPs and RAPs throughout the life of the Project.
    Environmental sustainability also depends on WASA maintaining an 
environmental management unit which will be responsible for 
environmental compliance of the urban water supply and Metolong bulk 
water conveyance systems. The DWA, which will (a) implement the 
wetlands restoration activity, (b) in conjunction with the DRWS, 
monitor performance of rural water supply systems and (c) in 
conjunction with the Ministry of Health and Social Welfare (``MoHSW''), 
monitor performance of rural sanitation systems, must continue to 
expand field staff in its district offices to strengthen its monitoring 
and oversight capabilities. Technical assistance will be provided to 
the DWA through the course of this Compact to assure sufficient 
resources to implement Compact activities.

C. Health Sector Project

1. Summary of Project and Related Activities
    The latest demographic and health survey estimated that 24 percent 
of adults ages 15-49 in Lesotho are HIV/AIDS positive; the third 
highest prevalence rate in the world. This has

[[Page 43394]]

the potential to severely hamper the country's efforts to reduce 
poverty and promote economic growth.
    This Project is designed to mitigate the negative economic impacts 
of poor maternal health, HIV/AIDS, tuberculosis (``TB'') and other 
diseases by strengthening the country's health care system. The primary 
Project activities include: rehabilitating health centers, 
rehabilitating and constructing anti-retroviral therapy (``ART'') 
clinics in selected hospital out-patient departments, constructing a 
central laboratory and blood transfusion center and strengthening key 
complementary inputs to the health care system (including training, 
medical waste management, health management information systems and 
decentralized management). MCC Funding will support the Government's 
efforts to significantly increase access to life-extending ART by 
providing a sustainable platform to deliver this and other essential 
health services throughout the country. This has the potential to 
result in a measurable extension of productive life-years for people 
living with HIV/AIDS, TB and other debilitating diseases. In-country 
staff of the President's Emergency Plan for AIDS Relief (``PEPFAR'') 
and other donors have worked with the Government and MCC staff in the 
design and assessment of this Project activity.
    In connection with the Health Sector Project activities, MCA-
Lesotho will assist and take all necessary steps to ensure that where 
and when required by the MCC Environmental Guidelines, the MCC Gender 
Policy or the laws of Lesotho, an EIA or EA, an EMP, an HIV/AIDS 
awareness plan, and, if necessary, a RAP or RPF (consistent with World 
Bank Operational Policy 4.12 on Involuntary Resettlement) are prepared 
to the satisfaction of MCC and in accordance with the Lesotho National 
Environment Act of 2001 and Lesotho Guidelines for Environmental Impact 
Assessment, in each case as the same may be amended from time to time. 
MCA-Lesotho also will ensure that, for each activity requiring an 
environmental license under the Lesotho National Environment Act of 
2001, a ``Project Brief'' (as defined in the Lesotho National 
Environment Act of 2001) and any necessary supporting studies will be 
submitted to, and approved by, the Government's environmental 
authorities prior to the initiation of construction activities, and 
that such environmental license will be maintained in good standing 
throughout the Compact Term. MCC Funding will support implementation of 
the environmental and social mitigation measures identified in the 
EIA(s) or EA(s), EMP(s), and RAP/RPF(s).
    The following summarizes each Project activity under the Health 
Sector Project:
    (a) Health Centers Activity.
    This Project activity focuses on renovation and rehabilitation of 
up to 150 health centers, to bring the national stock of health centers 
up to a common standard. These centers play a primary role in the 
provision of HIV/AIDS prevention, TB treatment and maternal and child 
health services. Renovations are timely given the devolution of 
responsibility for these centers to districts and communities. The 
MoHSW and the Ministry of Local Government can use this visible 
opportunity of renovated health services to empower local leaders with 
revitalizing community health services. The renovation of associated 
staff housing and improvement of water, power and communications will 
also improve retention of nurses and health personnel at these 
facilities.
    The 150 health centers are owned by MoHSW, the Christian Health 
Association of Lesotho (``CHAL''), and the Red Cross of Lesotho. 
Eighteen of these facilities will be enlarged due to current and 
projected patient loads and facility conditions, and six health centers 
will be relocated.
    Construction and rehabilitation contracts will include capital 
project maintenance for the life of this Compact. In addition, during 
years two and three of the term of this Compact, MCC Funding will 
support technical assistance to work with the MoHSW in developing 
maintenance systems options for decentralized services.
    Specifically, MCC Funding will support the following:
    (i) The design and construction supervision for up to 150 health 
centers;
    (ii) The rehabilitation and/or construction of these health 
centers, including, but not limited to, the rehabilitation of related 
staff housing where appropriate;
    (iii) Preparation of environmental ``Project Briefs'' and any 
supporting EA or EIA, EMP, and/or RAP or RPF required to meet MCC 
Environmental Guidelines and environmental licensing requirements under 
the Lesotho National Environment Act of 2001, as the same may be 
amended from time to time;
    (iv) Implementation of environmental and social mitigation measures 
pertaining to the rehabilitation and/or construction of health centers 
funded under this Compact per the requirements of the EA/EIA(s), 
EMP(s), and RAP/RPF(s) referred to in clause (iii) above;
    (v) Power, water, telecommunications equipment as needed to reach 
MoHSW standards for these health centers; and
    (vi) Medical equipment and instruments and clinical furniture as 
required to meet MoHSW clinic standards.
    (b) ART Clinics Activity.
    This Project activity will improve infrastructure in up to 14 
hospital out-patient departments (``OPDs'') and provide management 
training to support extension of ART. This will complete national 
coverage of ART at the hospital level. Designs for reconfiguring the 
current OPD to include adequate space and appropriate patient flow for 
incorporating ART services will be tailored to each hospital. The 
status of OPD facilities for managing TB co-infection will also be 
addressed in the design.
    Specifically, MCC funding will support the following:
    (i) The design and construction supervision to incorporate ART 
services for up to 14 hospital out-patient departments;
    (ii) The rehabilitation and/or construction of up to 14 expanded 
hospital out-patient departments;
    (iii) Preparation of environmental ``Project Briefs'' and any 
supporting EA or EIA, EMP, and/or RAP or RPF required to meet MCC 
Environmental Guidelines and environmental licensing requirements under 
the Lesotho National Environment Act of 2001, as the same may be 
amended from time to time;
    (iv) Implementation of environmental and social mitigation measures 
pertaining to the rehabilitation and/or construction of ART clinics 
funded under this Compact per the requirements of the EA/EIA(s), 
EMP(s), and RAP/RPF(s) referred to in clause (iii) above;
    (v) Power, water and telecommunications equipment as needed to 
reach MoHSW standards for hospital OPDs;
    (vi) Medical equipment and instruments, clinical furniture, and 
office equipment and furniture as required to meet MoHSW ART standards; 
and
    (vii) Training for medical and administrative personnel on OPD 
management.
    (c) Central Laboratory Activity.
    The central laboratory to be constructed with MCC Funding is 
critical to the national HIV/AIDS prevention, ART and TB programs. The 
current laboratory is too small to house the current level of testing, 
and has no

[[Page 43395]]

room for expansion. It is also slated for decommissioning when the new 
National Reference Hospital is developed. In-country and short-term 
external training for laboratory staff also will be supported through 
this Project activity.
    Specifically, MCC Funding will support the following:
    (i) design and construction of the new central laboratory;
    (ii) equipping of the new central laboratory;
    (iii) preparation of environmental ``Project Briefs'' and any 
supporting EA or EIA, EMP, and/or RAP or RPF required to meet MCC 
Environmental Guidelines and environmental licensing requirements under 
the Lesotho National Environment Act of 2001, as the same may be 
amended from time to time;
    (iv) implementation of environmental and social mitigation measures 
pertaining to the rehabilitation and/or construction of the central 
laboratory funded under this Compact per the requirements of the EA/
EIA(s), EMP(s), and RAP/RPF(s) referred to in clause (iii) above; and
    (v) training for new equipment, service expansion and quality 
assurance associated with the new central laboratory.
    (d) Blood Transfusion Service Activity.
    Safe blood for transfusions is an important element of a health 
system. A more formal system of blood supplies is needed. Countries 
that have expanded ART services have also seen the need for 
transfusions increase, as severely anemic patients are able to recover 
when on medication. A dedicated, central facility for collecting and 
processing blood, two mobile collection units, and blood storage 
equipment for two Government-owned and operated regional centers will 
be funded by this Project activity. The central blood collection and 
processing facility will be developed at Botsabelo, in Maseru.
    Specifically, MCC Funding will support the following:
    (i) the design and construction of the new central blood collection 
and processing facility;
    (ii) equipping of the new central blood collection and processing 
facility;
    (iii) preparation of environmental ``Project Briefs'' and any 
supporting EA or EIA, EMP, and/or RAP or RPF required to meet MCC 
Environmental Guidelines and environmental licensing requirements under 
the Lesotho National Environment Act of 2001, as the same may be 
amended from time to time;
    (iv) implementation of environmental and social mitigation measures 
pertaining to the rehabilitation and/or construction of the blood 
transfusion service activity funded under this Compact per the 
requirements of the EA/EIA(s), EMP(s), and RAP/RPF(s) referred to in 
clause (iii) above;
    (v) training for new equipment, service expansion and quality 
assurance;
    (vi) two mobile blood collection vehicles;
    (vii) one blood transportation vehicle; and
    (viii) refrigeration equipment for blood storage and limited blood 
collection furniture for two Government owned collection sites operated 
by the Blood Transfusion Service at Leribe and Mohales' Hoek.
    (e) National Health Training College Activity.
    The human resources situation has deteriorated over the past decade 
in all the countries of Southern Africa. Lesotho has undertaken a 
number of initiatives to reverse this trend. This Program activity will 
support efforts to increase the number of graduates from nursing and 
allied health (for example, pharmacy and lab technicians) programs by 
developing additional dormitories and staff residences at Lesotho's 
National Health Training College (``NHTC''). Other inputs, discussed in 
the Health Systems Strengthening Activity section below, will 
strengthen tutor and mentoring capacities.
    Specifically, MCC Funding will support the following:
    (i) the design and construction of 120 dormitory spaces and 6 
apartment residences at the NHTC, which apartments will be initially 
allocated for use on a priority basis by tutors and international 
technical staff working in connection with the Project;
    (ii) preparation of environmental ``Project Briefs'' and any 
supporting EA or EIA, EMP, and/or RAP or RPF required to meet MCC 
Environmental Guidelines and environmental licensing requirements under 
the Lesotho National Environment Act of 2001, as the same may be 
amended from time to time;
    (iii) implementation of environmental and social mitigation 
measures pertaining to the rehabilitation and/or construction of NHTC 
dormitories and staff residences funded under this Compact per the 
requirements of the EA/EIA(s), EMP(s), and RAP/RPF(s) referred to in 
clause (ii) above; and
    (iv) furniture, appliances, and furnishings for these new 
dormitories and staff residences.
    (f) Health Systems Strengthening Activity.
    The overall success of this Project hinges upon improved delivery 
of the national essential health services package, including HIV/AIDS 
prevention and treatment. In the context of Lesotho, the poor quality 
of infrastructure was identified by the Government as a constraint to 
improved and expanded service delivery. In addition, key health systems 
areas have been identified for Program support. These key interventions 
are necessary to ensure that improved, vital services are cost-
effectively provided at the community level.
    Training
    This Project activity will strengthen pre-service and in-service 
training capacities. Currently, a large number of qualified applicants 
are rejected by the training institutions due to a lack of tutors for 
the program; this, in turn, results in too few graduates to fill MoHSW 
and CHAL vacancies resulting from retirement, death, and out-migration. 
This Project activity will assist in developing qualified tutors, 
mentoring programs, and improved curricula for preparing a consistently 
larger cadre of nurses to provide health services at the community 
level.
    In-service training is a vital element of job satisfaction, 
professional growth, and quality assurance. Currently, there is no plan 
for continuing education of MoHSW and CHAL professionals. The Project 
will assist the Government in developing an in-service training plan 
within the context of devolved services, and assist in implementing the 
most critical elements of the plan. This is likely to include health 
center level training of health center staff, local administrations, 
and communities regarding the new roles and responsibilities of each.
    Decentralization
    The Government is in the process of devolving service delivery to 
the district level. The MoHSW is one of the first ministries to 
implement the new plan. To date, three districts have piloted 
decentralized health services. Between 2007 and 2010, this is to be 
expanded to the remaining seven districts. In Lesotho, as well as in 
other countries, there is evidence that the process of 
decentralization--particularly if not well-managed--can disrupt health 
services delivery. This is a critical point for health status and 
health services in Lesotho. This Project activity will provide 
additional support, in collaboration with the World Bank, to ensure 
that decentralization is rapidly and sustainably effected in the health 
sector. Areas of particular attention

[[Page 43396]]

include health information systems, district health management, TB 
surveillance and infection control, health services quality, health 
facility maintenance, communications and public outreach.
    Research and Development Unit within MoHSW
    Medicine is strongly evidence-based and research plays a vital role 
in developing interventions and assessing practices. The MoHSW has a 
two person health research unit with a mandate to provide oversight to 
research activities in the health sector. This team will be supported 
through MCC Funding to increase their capacity to coordinate research 
activities and to share vital lessons learned from Lesotho-specific 
health research.
    Specifically, MCC Funding will support the following:
    (i) expatriate tutors and mentors;
    (ii) in-service, in-country and limited short-term external 
training of nurse and allied professional tutors;
    (iii) incentives for current tutors to increase the number of 
students trained;
    (iv) consulting services in continuing education and 
decentralization;
    (v) in-service training on health center management, 
decentralization, research and infection control;
    (vi) office equipment and computers for program management, 
district health information offices and the research unit; and
    (vii) limited funding for external travel for Program related 
activities.
    (g) Medical Waste Management Activity.
    MCC funding will be used to help the Government improve 
occupational health and safety and medical waste management practices, 
which at present pose significant environmental, health, and safety 
hazards and do not comply with MCC Environmental Guidelines. In 2005, 
in conjunction with a World Bank health sector reform project, the 
Government conducted a comprehensive assessment of its medical waste 
management practices and prepared a National Health Care Waste 
Management Plan (``WMP''), though little progress has been made in its 
implementation. The primary objective of this activity will be to 
update and implement the WMP, provide institutional strengthening of 
Government agencies that will be responsible for implementing, 
monitoring, and enforcing the policies and standards established under 
the new WMP, and support public outreach and awareness campaigns. All 
work conducted under this activity will be closely coordinated with the 
World Bank and other donors involved in health sector reform.
    This activity is critical to ensuring that health sector 
interventions under this Compact comply with MCC Environmental 
Guidelines. Moreover, meaningful improvements in medical waste 
management and occupational health and safety are considered an 
important factor in the environmental and social sustainability of the 
health sector overall.
    Specifically, MCC Funding will support the following activities:
    (i) supplement previous studies (including the 2005 WMP) with new 
field investigations and literature reviews in order to characterize 
baseline conditions and identify the environmental, health, and safety 
risks of current occupational health and safety and medical waste 
management practices;
    (ii) based on the results of supplemental studies, update the 2005 
WMP and the estimated capital and recurrent costs for implementing the 
plan;
    (iii) develop a comprehensive finance plan for funding capital and 
recurrent costs;
    (iv) develop new hazardous waste management policies, regulations, 
standards, and operating procedures, per the recommendations in the 
updated WMP;
    (v) develop an environmental management and monitoring system, per 
the recommendations in the updated WMP;
    (vi) develop occupational health and safety and waste management 
licensing and accreditation procedures, per the recommendations of the 
updated WMP;
    (vii) provide technical assistance and capacity building to 
Government agencies pertinent to the implementation and sustainability 
of the updated WMP; and
    (viii) support and/or conduct public awareness and training 
programs.
2. Project Implementation.
    The Government and the donor community have collaborated to build 
capacity to undertake donor-financed programs in the health sector. 
Currently, a large portion of the total health resources are provided 
through bilateral and multilateral donors. The Health Sector Project's 
implementation structure has been developed in an effort to take 
advantage of and build on current capacities and structures, while 
being careful not to overwhelm them.
    Specifically, the major elements of the Health Sector Project's 
implementation structure consist of:
    (a) MCA-Lesotho.
    MCA-Lesotho will include a full-time health sector project manager 
who reports to the director of operations. This person will be 
responsible for overseeing smooth Project implementation across all 
activities. He or she will ensure that critical milestones are met and 
activities progress as planned. This program manager will be 
responsible for ensuring that implementation problems are resolved and 
alerting the Government of any constraints. The manager will ensure 
that Procurement Agent actions for the Health Sector Project are 
prioritized based on the Project's implementation plan. This person 
will also serve as MCA-Lesotho's liaison to the Health Sector PIU (as 
defined below) and to health donors' forums.
    (b) MoHSW.
    The MoHSW has overall responsibility for oversight of 
implementation of the Health Sector Project. The MoHSW also will be 
responsible for technical quality, timeliness of implementation, and 
integration into MoHSW of Project activities. The MoHSW will coordinate 
activities in relation to the Ministry of Local Government, and with 
CHAL and the Lesotho Red Cross Society.
    A dedicated Health Sector Project Implementation Unit (``Health 
Sector PIU'') will be established within the MoHSW to administer the 
Project. The establishment of the Health Sector PIU will be the 
responsibility of the MoHSW with assistance from MCA-Lesotho. The MoHSW 
will be responsible for integrating Project activities within the 
framework of the MoHSW as appropriate. For purposes of this Compact, 
the Health Sector PIU, the MPMU, the DRWS PIU, the DWA PIU and the WASA 
PIU, may each be referred to as a ``Project Implementation Unit'' and, 
collectively as the ``Project Implementation Units.''
    The Health Sector PIU will draft technical specifications and terms 
of reference for the following:
    (i) design and construction supervision of health clinics and 
related staff accommodation including the supply of equipment and 
furniture for renovation, relocation or rebuild of up to 150 health 
centers;
    (ii) design and construction supervision of the Botsabelo complex 
activities, including the Blood Transfusion Services center, the 
Central Laboratory, and NHTC dormitories and residences, including 
laboratory equipment, furnishings, furniture and IT equipment;
    (iii) design and construction supervision of ART centers in 14

[[Page 43397]]

hospitals including the supply of equipment, instruments and furniture 
per region;
    (iv) preparation of EA(s) or EIA(s), EMP(s), and if necessary 
RAP(s) or RPF(s) for the above infrastructure activities in accordance 
with MCC Environmental Guidelines and the National Environment Act of 
2001;
    (v) engagement of technical assistance contracts/contractors for 
capacity building in human resources, decentralization and waste 
management; and
    (vi) Project-related training activities.
    The Health Sector PIU will be responsible for the above-listed 
activities which include, but are not limited to, design reviews, 
tender document reviews, environmental management and compliance, and 
public outreach and stakeholder engagement.
    Rehabilitation of the health centers will require participation of 
the local government structures, CHAL and the Lesotho Red Cross 
Society. The MoHSW is responsible for developing formal agreements with 
CHAL and the Lesotho Red Cross Society with respect to MCA-funded 
infrastructure improvements.
    The Ministry of Local Government, CHAL and the Lesotho Red Cross 
Society will each identify a main counterpart to represent the 
organization on Compact activities. These individuals will have 
responsibility and authority for coordination and implementation of 
Program activities within their respective organizations.
    In addition, consultations will be conducted with affected parties 
and other stakeholders in support of preparation of any EA (or EIA as 
applicable), EMP, and, if necessary, RAP (or RPF as applicable) for the 
Health Sector Project activities in accordance with MCC Environmental 
Guidelines and Government environmental regulations.
3. Beneficiaries
    The immediate primary beneficiaries of the Health Sector Project 
are the 17,000 HIV positive persons in need of ART that are not 
currently receiving it, who will be able to access these expanded 
clinic and laboratory services from the Government, CHAL and the 
Lesotho Red Cross Society. Additionally, many of the 17,000 persons 
already enrolled in ART services will be able to access medication and 
follow-up from a local health center, rather than having to wait hours 
in line at a hospital-based center, with much higher risk of exposure 
to TB and other co-infectious diseases. Services will also benefit the 
additional 38,000 Basotho who are estimated to need ART services in the 
coming ten years. The majority of these beneficiaries are adults, aged 
15-49. Currently, more women than men seek services, as expected given 
that HIV rates are higher for women than for men. Program statistics 
will be periodically reviewed to ensure that age, gender, income, or 
geographic biases are not reflected in client statistics. Mitigation 
efforts will be instituted if needed.
    Other primary beneficiaries of this Project include poor urban and 
rural citizens who seek and receive improved health services from the 
nearest Government, CHAL, or Lesotho Red Cross Society health centers. 
These persons will have the opportunity to learn of life-saving 
programs; locally obtain referrals, medical follow-up and medications; 
and have a resource to protect the health of mothers and newborns. More 
than one million visits are made to health facilities per year--with 
Project success, this number will increase, especially at lower levels 
of facilities. This will result in cost-savings, time-savings, and 
improved health status and longevity, and ultimately in improved 
productivity and incomes. In particular, services that reduce co-
infection with TB and improve maternal health and safe delivery will 
benefit the poor.
    Secondary beneficiaries include those who, because of the Project 
activities, are less exposed to infectious TB, particularly multi-drug 
and extreme drug resistant TB, from other patients and from the 
population at large due to improved facility design and management, and 
better disease management.
    Secondary beneficiaries also include nurses and medical workers who 
will have the skills and materials to lower their risk of infection 
from hazardous wastes in the workplace. Communities will also benefit 
with reduced risks of infection from improper disposal of hazardous 
wastes by health personnel.
4. Donor Coordination; Role of Private Sector and Civil Society.
    Other donors and health partners are working together on health 
systems issues. MCC inputs in these areas are coordinated with these 
donors and with Government programs.
    In 2000, the Government embarked on a 10-year reform of the health 
sector with donor assistance, particularly Irish Aid and the World 
Bank. The reform program is oriented to improving health services 
delivery, financial management and accountability, monitoring and 
evaluation, and donor coordination. Key features include 
decentralization of public and primary health services to the district 
level, greater involvement of local administrations and communities in 
health decision making, new financial management systems, improved 
medical waste management, increased partnerships for health delivery, 
and better planning and management of infrastructure and human 
resources. The Project activities are also in concordance with broader 
public administration and financial reforms being undertaken across 
ministries and sectors by the Government.
    As part of this reform process, a sector-wide approach (SWAP) 
mechanism for health is being developed, with the World Bank and others 
likely to contribute to basket funding by 2009. Participating donors 
have already agreed to common health sector indicators based on the 10-
year reform program and participate in annual joint reviews.
    This Project's activities have been designed within this 
coordinated context. The Project will strengthen the infrastructure for 
integrated delivery of services and will provide HR strengthening. 
Major donors of particular relevance to the Health Sector Project 
include the United States government (through PEPFAR), Irish Aid, the 
World Bank, the African Development Bank, United Nations agencies and 
the Global Fund for AIDS, Tuberculosis and Malaria (``GFATM''). 
Multiple consultations have been undertaken by MCC with each of these 
parties.
    In addition, donor relations in the health sector are coordinated 
by the MoHSW and through two consortia: the Health Partners who provide 
assistance more broadly to the health sector, and the UN Expanded Theme 
Group on HIV/AIDS. Both fora meet monthly, and there is overlap between 
the groups. There is also an AIDS Country Coordinating Mechanism for 
the GFATM, currently chaired by the Principal Secretary of MoHSW, that 
meets monthly, or as needed, and includes national organizations 
involved in AIDS prevention and outreach, and major donors in these 
efforts. The United States government also has monthly meetings of all 
US-based partners working on HIV/AIDS. MCA-Lesotho is expected to 
become an active participant in these fora as appropriate.
    In Lesotho, the major non-government providers of health services 
are the mission and church-related providers under the umbrella 
organization, CHAL.

[[Page 43398]]

CHAL provides roughly half of the health services in Lesotho, with the 
MoHSW the main provider of the remaining fifty percent. CHAL operates 
health centers and hospitals, and for the past decade, has received 
subvention from the Government for providing basic services. The 
relationship between the public and non-government sectors has recently 
been strengthened by signing of a formal Memorandum of Understanding 
between the MoHSW and CHAL. Under this Project, MCA funding will be 
made available for renovation of health infrastructure under CHAL 
auspices.
    Civil society organizations that will influence and participate in 
Project activities include the Lesotho Red Cross Society, the Lesotho 
Nurses Association, the Lesotho Association of People Living with AIDS, 
and community-based organizations with interests in community health. 
International NGOs, including Medecins Sans Frontiers, Partners In 
Health, and others have been consulted in program development and 
assessment.
    An extensive consultative process was undertaken in designing this 
activity.
    The World Bank has taken the lead in providing funding for the 
initial waste management assessment for the health sector in 2005. As 
the World Bank's program has been defined for the next five years, MCC 
and MCA-Lesotho have and will continue to collaborate with the World 
Bank team to ensure that our respective interventions in waste 
management have complementary short and long-term objectives and a 
mutually agreed upon strategy for action.
    MCC has closely coordinated with other donors in the health sector 
to ensure that the Project supports national health priorities and does 
not duplicate other donor efforts. MCC has maintained regular 
communications and participated in joint reviews with the donors most 
involved in HIV/AIDS and health. These and other donors provided design 
support to the MoHSW, and assisted MCC in the due diligence process. In 
addition, MCC periodically met with and briefed the donor coordinating 
groups for the health sector: the Health Partners, chaired jointly by 
the World Health Organization Representative and Irish Aid, the UN 
Expanded Theme Group on HIV/AIDS and US-based partners working on HIV/
AIDS with the support of PEPFAR funding. The proposed project 
strengthens the infrastructure for integrated delivery of services and 
would provide support to augment human resources. It supports the 
Government's reform efforts and fits within the combined donor strategy 
for the health sector.
    The U.S. Government does not have a large bi-lateral program with 
Lesotho. The only agency which has a significant program with a 
presence in Lesotho is PEPFAR, focused on HIV/AIDS. The U.S. 
Government's HIV/AIDS Coordinator based in Lesotho has provided 
guidance to MCC in undertaking due diligence on the health sector 
project since May 2006. The Project has been designed partially with 
support from PEPFAR Regional HIV/AIDS Program partners, including the 
Centers for Disease Control and Prevention, Southern Africa Regional 
Office, the Capacity Project, and Safe Blood for Africa. In addition, 
the Clinton Foundation, Partners in Health, the African Development 
Bank, and other MoHSW health partners have contributed.
5. USAID
    Current USAID involvement in health in Lesotho is through support 
for and oversight of PEPFAR activities. The Health Sector Project was 
designed and will be implemented in close coordination with United 
States government efforts relating to HIV/AIDS, including PEPFAR 
interventions. Formal mechanisms, including joint meetings, for in-
country coordination already exist and will be utilized.
6. Sustainability
    Sustainability of health services is a critical issue, particularly 
given the rapid increase of donor-supported ART. In partnership with 
the World Bank and other donors, the Government is developing a 
national health financing strategy to identify the costs of the 
essential health services package, including ART, and to identify gaps 
and potential sources of funds. This strategy will include means of 
regular dialogue with health donors in order to ensure continued 
financing and identify potential commitment gaps early. Implementation 
of the critical elements of this strategy will be jointly monitored by 
MCC and other health donors.
    In other areas, the relationship between CHAL and the MoHSW has 
been formalized through a January 2007 Memorandum of Understanding in 
an effort to improve the quality of service delivery throughout the 
country. The Government is working with the International Finance 
Corporation to replace the current national referral hospital through a 
public-private partnership arrangement, hoping to free up a portion of 
the 26 percent of the health budget utilized for that hospital.
    The Health Sector Project was designed with an eye toward 
containing incremental recurrent costs. Facilities were slated for 
rehabilitation or development where the use of incremental staff and 
financial resources could provide the most impact and only where staff 
and budget increments were deemed manageable and within the framework 
of the Government's ``Medium Term Expenditure Framework'' for health. 
Architectural and engineering briefs for all facilities aim to reduce 
long-term maintenance and utility costs. Decentralization of health 
services management to the district level will increase the local voice 
in assuring that quality health services are delivered. Training 
activities will largely be undertaken in Lesotho, to reduce potential 
staff migration. Capacity building activities in the areas of district 
health management, outpatient department management, laboratory quality 
assurance, and in-service training of district health providers will 
increase program sustainability.
    The environmental and social sustainability of the Health Sector 
Project is dependent on the implementation of a national medical waste 
management plan. This activity is both an immediate safeguard against 
infection and environmental risk with MCC investments in the heath 
sector and also an opportunity for MCC to contribute to a sustainable 
regulatory structure that will last beyond MCC's five-year Compact 
schedule. MCC will also require political and financial assurances that 
the plan be institutionalized within the regulatory framework, funded 
by the recurrent budget and overseen by a qualified government entity 
by the completion of the five-year program.
    In addition, long-term environmental management and monitoring 
plans, including on-going public outreach and other social impact 
mitigation measures, will be implemented in accordance with project-
specific EIAs, EMPs, and, where necessary, RAPs or RPFs. Disbursements 
of MCC Funding will be conditioned on the Government completing each of 
these studies to the satisfaction of MCC prior to construction and then 
demonstrating continued compliance with applicable EMPs and RAPs 
throughout the life of the Project.
    Special efforts will be undertaken to attract male rural health 
care workers through the human resources nurse outreach training 
program. This should encourage more men in the rural areas to seek out 
medical assistance, to discuss sexual histories and to address

[[Page 43399]]

ongoing risky behavior which puts all Basotho at risk.

D. Private Sector Development Project

1. Summary of Project and Related Activities
    This Project is designed to increase private sector activity in 
Lesotho by improving access to credit, reducing transaction costs and 
increasing the participation of women in the economy. The activities 
include improving land administration, modernizing the commercial legal 
system, strengthening payment and settlement systems, supporting the 
provision of credit bureau services, including assisting the roll-out 
of a national ID scheme, and training and outreach to support gender 
equality in economic rights. These Project activities are an essential 
component of the Government's major policy reform program and will 
contribute to the broader efforts to attract foreign investment and 
stimulate growth of Basotho-owned companies. The Government has already 
obtained funding for several components related to the Private Sector 
Development Project from the World Bank, which recently approved a 
private sector competitiveness and economic diversification credit.
    The following summarizes each Project activity under the Private 
Sector Development Project:
    (a) Credit Bureau and National Identification Card Activity.
    The main objective of the credit bureau activity is to establish a 
register that facilitates the exchange of information and the screening 
of prospective debtors. Establishing a credit bureau has been cited by 
credit grantors as a prerequisite to expanding access to financial 
services, especially credit, to poor and rural populations.
    The Government has opted to link with one or more private credit 
bureaus now operating outside of Lesotho. Several South African credit 
bureau operators have expressed an interest in extending existing 
infrastructure and expertise into Lesotho to support its credit bureau 
needs. The cross-border solution selected is less expensive and more 
comprehensive than a ``Lesotho only'' credit bureau. In addition to 
cost savings, linking with a South African credit bureau will allow 
members to track the heavy volume of cross-border borrowing. In order 
to implement a cross-border credit bureau, the Government will have to 
undertake a legal and regulatory review and update its legislation and 
regulations as needed to ensure harmonization with South African 
privacy and information protection principles and relevant provisions 
of the South African National Credit Act.
    Development of a national identification card (``NIDC'') is a 
necessary step in the process of establishing a credit bureau. The NIDC 
will restrict all citizens and lawful residents to a single unique 
identity number that can be used to recognize individuals in multiple 
information technology (``IT'') systems. MCC will collaborate with the 
World Bank, which has approved the engagement of an international 
consultant to conduct a feasibility study that will determine the most 
effective and cost efficient approach to launch the NIDC, in the final 
design of this activity. The NIDC will be implemented by a third party 
and managed by the Lesotho Ministry of Home Affairs (``MoHA''), with 
oversight provided by the Public-Private Steering Committee, an 
existing ministerial committee chaired by the Deputy Prime Minister. 
MCC Funding will support training and capacity building for MoHA 
employees to assure sustainability.
    The social/gender specialist employed by MCA-Lesotho will review 
the World Bank's feasibility study and provide inputs to assure that 
the NIDC program is safeguarded against human rights abuses and is 
compliant with the MCC Gender Policy. This system should help protect 
against gender, HIV and marital status discrimination in banking and 
credit schemes by providing lenders accurate and objective information 
on an individual's credit history regardless of gender or HIV/AIDS 
status. In addition, human rights groups will be consulted during the 
course of the development and implementation of the scheme to prevent 
potential human rights abuses or infringements on individuals' private 
lives.
    Specifically, MCC Funding will support the following:
    (i) Production and issuance costs for NIDC cards, including 
hardware, software, data capture, staff training and development for 
the MoHA;
    (ii) Consultation in respect of necessary legal and regulatory 
reforms; and
    (iii) Development and execution of a public awareness campaign with 
respect to the NIDC.
    (b) Payments and Settlement Systems Activity.
    The main objectives of the payment system modernization Project 
activity are the introduction of automated clearing and alternative 
payment options that will reduce payment and settlement times and 
lessen the use of cash and checks. Automated clearing and additional 
payment options should facilitate trade and improve clearing times for 
all payment streams, decrease costs associated with funds transfer, 
reduce fraud, widen access to financial services and reduce poverty by 
increasing economic growth. Another objective is to strengthen 
Lesotho's financial infrastructure and promote further integration of 
its payment and settlement systems with those of its neighbor, South 
Africa.
    A large percentage of the population of Lesotho is ``unbanked,'' 
including an estimated 85 percent of businesses. In many parts of the 
country, people travel up to 120 kilometers to access banking services. 
One of the primary focuses of this activity is to expand the reach of, 
and institutional participation in, the payments system by, among other 
things, adding functionality for telephone and other smart card 
transactions. Another focus is to include the Post Bank in the payments 
system, which will greatly expand its reach and will provide benefits 
to rural populations relatively quickly. Adding payment options and 
channels, such as payments through remote, battery or crank operated 
point-of-sale terminals will make access more convenient and economical 
for much of the unbanked population.
    Specifically, MCC funding will support the following:
    (i) Reviewing the legal and regulatory structure governing domestic 
and cross-border payments;
    (ii) Harmonizing laws regarding cross-border payments and currency 
controls;
    (iii) Paying for the initial year of the Automated Clearing House 
(``ACH'') provider's fee for implementation, consultation, training and 
contract execution in connection with making multiple payment streams 
available in Lesotho;
    (iv) Paying for the costs associated with two imaging machines and 
ancillary hardware, software and training for operations at the Central 
Bank of Lesotho if the Central Bank of Lesotho and financial 
institutions agree to a system for delivering checks directly to the 
Central Bank of Lesotho from all bank branches for imaging and 
subsequent forwarding to the ACH provider;
    (v) Paying for the costs associated with the distribution of 
payment options and channels, such as point of sales terminals; and
    (vi) Implementing a public awareness campaign for banks and 
consumers with respect to this Project activity.
    (c) Land Administration Reform Activity.

[[Page 43400]]

Policy and Legal Reform
    Under this Project activity, MCC Funding will support technical 
assistance to the Government to revise land reform legislation 
currently in draft form and to develop its land policy, thereby 
promoting the use of land as an economic asset. Gender analysis will 
ensure that revisions to the draft Land Bill are congruent with the 
Legal Capacity of Married Persons Act and other gender equality reforms 
and principles. MCC Funding will permit the Government to obtain 
technical assistance to draft laws and related implementing regulations 
as needed to realize land policy reforms. Finally, MCC Funding will 
support the education and training of land administration officials, 
community councils and the public on land administration issues and the 
formalization of rights to land. The expected outcomes of this Project 
activity include adopting a new land policy reinforced by the passage 
of a new Land Act and the promulgation of its implementing regulations 
and spreading a wider understanding and awareness of the new land 
policy among officials and citizens.
    Systematic Regularization of Land in Urban Areas and Improvement of 
Rural Land Allocation Processes
    This Project activity will fund the systematic regularization and 
upgrading of informal settlements in urban and peri-urban areas, 
beginning in Maseru and extending to other cities and towns to the 
extent MCC Funding is available. As part of systematic regularization, 
local adjudication teams and surveyors will work with occupants to 
define the boundaries of parcels and establish cadastral plans, design 
access roads and utility rights of way as needed, and issue leases to 
the legally recognized title holders. Registration of existing land 
occupants will be based on inclusive adjudication provisions enacted as 
part of the legal and regulatory framework. Activities related to 
systematic regularization of land and improvement of the land 
allocation process will be designed to increase gender equity through 
mandatory joint titling of rights to married couples.
    A public outreach and training program will support the activity by 
informing occupants of regularization activities and encouraging their 
cooperation with adjudication teams. Special efforts will be made to 
ensure that training, public awareness and access to information is 
available to women and socially vulnerable individuals. MCC Funding 
will also assist community councils to improve their records of rural 
land allocations and to support the Government's efforts to train 
community councils and traditional authorities on the land allocation 
process. This Project will help train district land teams to complete 
an inventory of existing land allocations and establish improved record 
keeping procedures. MCC Funding will also support the Government's (and 
other donors') ongoing efforts to train community councils and 
traditional authorities on their roles in land allocation and land 
management. The expected outcomes of these activities include the 
formalization and registration of the rights to over 55,000 parcels of 
informally occupied land in Maseru and other cities of Lesotho; the 
improvement of records on rural land allocations maintained by 
community councils; and the training of community councils, traditional 
authorities, and rural citizens on land allocation and management 
procedures.
Modernization and Improvement of Land Administration Services
    This Project activity will fund the simplification of land 
administration procedures and the development of a new land 
administration authority (``LAA'') that will be:
    (i) Professionally managed and operated;
    (ii) Operated in a largely autonomous manner in accordance with its 
objectives;
    (iii) Capable of providing cost-effective and efficient services to 
the public and land information users (including the poor);
    (iv) Able to hire and retain qualified managerial and technical 
staff; and
    (v) Self-sustaining.
    The LAA will be modeled after the Lesotho Revenue Authority, an 
autonomous parastatal body that collects taxes for the Government. MCC 
Funding will support the establishment of the technical platform for 
operation of the LAA, support hiring and training of managerial and 
technical staff, and provide material resources for the initial 
operation of the LAA. The expected outcomes of this Project activity 
include the adoption of a legal basis for the LAA; establishment of the 
LAA with qualified managerial and technical staff; and development of 
an appropriate technical platform (e.g., the appropriate land 
information systems and internal culture) for delivery of streamlined, 
cost effective and efficient land administration services to the 
public.

Public Outreach and Training

    This Project activity will fund public outreach and awareness 
activities in support of all of the land administration reform 
activities. MCC Funding will support training of land administration 
staff, community councils and traditional authorities as needed to 
implement land administration reform in Lesotho. The expected outcomes 
for this activity are greater public awareness of land matters and the 
benefits of formal title to land (i.e., a lease) and well-trained land 
administration staff and community councils.
    Gender analysis to ensure that revisions of the new Land Act are 
congruent with the Legal Capacity of Married Persons Act and other 
gender equality reforms and gender-responsive methodologies and 
approaches for training, such as separate meetings and training 
sessions, will be undertaken to ensure that women are included in all 
education and training for public officials and the public.
    (d) Civil Legal Reform Activity.
    This Project activity is an element of a broader Government program 
of legal reform and will provide faster, fairer and less expensive 
resolution of commercial disputes, whether large or small. According to 
the World Bank ``Doing Business'' survey, it takes nearly 700 days to 
resolve a dispute in the courts. This Project activity aims to cut the 
time and cost required to resolve a commercial dispute in half. This 
activity will promote an improved investment environment for businesses 
of all sizes, and will afford ordinary citizens better access to courts 
for economic disputes.
    Specifically, MCC funding will support the following:
    (i) The development of the Commercial Court, including the drafting 
and promulgation of procedures, capacity building, and--eventually--
reconstruction of a currently unused court building to house the 
Commercial Court. The court's focus will be on larger commercial 
disputes;
    (ii) The creation of modern case management procedures. All the 
courts of Lesotho suffer from a lack of modern case management 
procedures and technology. Modern case management will be introduced to 
the High Court, the new Commercial Court, and the Magistrate Court of 
Maseru;
    (iii) Promotion of alternative dispute resolution (``ADR''). The 
focus of this sub-activity will be a program of court-annexed mediation 
for commercial disputes. Increased use of private ADR will also be 
promoted; and

[[Page 43401]]

    (iv) The development of a simplified and expedited small claims 
process. Smaller commercial claims may have limited recourse to the 
judicial system. Introduction of a small claims process seeks to 
provide inexpensive and rapid resolution of the smallest commercial 
disputes.
    Any potential gender-based constraints to participation in the 
Project will be explored during the development of the Program-wide 
Gender Integration Plan. This Plan will include, as appropriate, 
recommendations for meaningful and inclusive consultations with women 
and other vulnerable/underrepresented groups, project-specific gender 
analyses and strategies for incorporating findings of the gender 
analyses into final Project designs.
    (e) Training and Public Awareness to Support Gender Equality in 
Economic Rights.
    MCC and the Government of Lesotho recognize that gender inequality 
can be a significant constraint to economic growth and poverty 
reduction. In December 2006, the Government passed into law the Legal 
Capacity of Married Persons Act which removes the minority status of 
married women. With assistance from MCC, the Government has already 
contracted for two related activities: A gender review of laws and 
policies with recommendations for reform, and the development of a 
training and public outreach program to realize in practice gender 
equality in economic rights.
    The gender review of laws and policies and additional due diligence 
on the effects of the Legal Capacity of Married Persons Act have 
revealed contradictions in Lesotho law. Removing these contradictions 
is important to assure the application of rights in the judiciary and 
also because poor, rural women do not usually have the resources to 
initiate an appeal if the conflicting law is the basis for a legal 
decision.
    Prior to the first Disbursement, the Government will undertake 
additional legal reform efforts to assure that the following economic 
rights are not contradicted by laws enacted prior to the Legal Capacity 
of Married Persons Act, including the right to:
    (i) Enter into a contract, including incurring indebtedness;
    (ii) Sue or be sued;
    (iii) Register immovable property in her name;
    (iv) Act as an executor of a decedent's estate;
    (v) Act as a director of a company;
    (vi) Act as a trustee of an estate;
    (vii) Bind oneself as a surety; and
    (viii) Buy, sell and use property as collateral for loans.
    The PSD Project includes a training and public awareness activity 
designed to realize gender equality in economic rights and promote 
enhanced access to credit for women.
    The first sub-activity is a training program to promulgate the 
Legal Capacity of Married Persons Act and other reforms aimed at gender 
equality in the economy. Specifically, MCC Funding will support:
    (ix) training the legal community, including judges, magistrates, 
lawyers, prosecutors, and police, and inclusive of the local and 
central courts that handle most of the matrimonial disputes;
    (x) training and training-of-trainers for relevant government 
ministries; and
    (xi) sector-specific training with special attention to the banking 
industry, potential women borrowers and those Government entities 
responsible for regulation and oversight.
    The second sub-activity is a public awareness and outreach program 
designed to develop knowledge, awareness and practices in support of 
these economic rights. This sub-activity will involve traditional 
authorities, religious leadership, civil society organizations, local 
government, churches, NGOs, and community-based organizations, 
including support groups, as stakeholders, and it will be implemented 
in all ten districts of Lesotho. Specifically, MCC funding will support 
the following:
    (xii) a five-year public awareness campaign dedicated to 
implementing gender equality in economic rights;
    (xiii) activities designed to be appropriate for specific 
stakeholder groups; and
    (xiv) The building of local capacity to continue advocacy for 
equality in economic rights following the MCC interventions.
2. Project Implementation
    (a) Credit Bureau and National Identification Card Activity.
    Implementation of the credit bureau activity will be managed by the 
Central Bank of Lesotho with oversight provided by the Public-Private 
Steering Committee, an existing ministerial committee chaired by the 
Deputy Prime Minister. The Public-Private Steering Committee's 
membership will include representation from the Central Bank of 
Lesotho, which will also have regulatory responsibility for the credit 
bureau, and the MoHA, which will have regulatory responsibility for the 
National Identification Card. MCC Funding will pay for the related 
legal and regulatory review and the consultation needed to ensure 
harmonization with South African privacy and information protection 
principles (as well as other relevant provisions of the South African 
National Credit Act) and will support training for the Central Bank as 
the credit bureau regulator. The credit bureau will be privately owned 
and funded and the private credit bureau operator will be responsible 
for soliciting credit bureau membership and gathering the information 
needed to populate the credit bureau data base.
    MCC Funding will assist the roll-out of the NIDC in support of the 
launching and operation of the credit bureau. MoHA will manage the NIDC 
implementation with oversight provided by the Public-Private Steering 
Committee. It is expected that the World Bank will engage the services 
of an international consultant to determine the most effective and cost 
efficient approach to launch the NIDC. Recommendations will include 
card design and implementation processes, as well as the appropriate ID 
card production system and long-term support systems best suited for 
Lesotho. Additionally, the consultant will design an advertisement and 
a public awareness campaign and detail final development processes and 
costs.
    (b) Payments and Settlement Systems Activity.
    The Government, as the current chair of the South African 
Development Community, has committed to regional integration of 
financial systems. In line with that commitment, the Government has 
opted to implement its payment system improvement by linking with a 
South African payment system provider rather than developing a 
standalone, proprietary system with the Central Bank of Lesotho.
    Implementation of the payments and settlement systems activity will 
be managed by the Central Bank of Lesotho with oversight by the Public-
Private Steering Committee referenced in subsection (a) above. 
Representation from the Central Bank of Lesotho, which will have 
regulatory responsibility for the credit bureau, will be added to this 
committee to address issues related to both the Credit Bureau activity 
and the Payments and Settlement System Improvement activity. MCC 
Funding will pay for the related legal and regulatory review and the 
consultation needed to ensure harmonization with other countries in the 
region.
    (c) Land Administration Reform Activity.
    Implementation of the land administration reform activity will 
require that a project implementation unit (``Land Administration 
Reform

[[Page 43402]]

PIU'') be established. The Land Administration Reform PIU will provide 
technical assistance to the Department of Lands, Surveys, and Physical 
Planning (``LSPP'') and the new LAA during the course of the Project, 
but will be more specifically focused on supporting the land 
administration bodies to meet Compact-related requirements for 
documentation (for example, project work plans, budgets and quarterly 
reports), procurements (drafting terms of reference for private sector 
providers) and performance monitoring and coordination of the 
activities of various implementers as necessary to achieve component 
objectives. The LSPP and the new LAA are expected to concentrate on 
day-to-day business and implementation of the changes in land policy 
expected during the term of this Compact. The Land Administration 
Reform PIU, although a separate entity, will be located within the LSPP 
offices or nearby to ensure close collaboration and communication on 
subjects related to project implementation. The four sub-activities 
under this Project activity and the implementing arrangement for each 
are as follows.
Policy and Legal Reform
    The main implementer of this sub-activity is to be a legal 
consulting team made up of a legal specialist familiar with 
international best practices and lawyers with knowledge of legal 
practices in Lesotho. The legal consulting team will support the LSPP/
LAA in the formation of new land policy, drafting laws and regulations 
implementing the policy, advocating in support of the adoption and 
broad acceptance of the new land policy, and implementing the land 
administration reforms (including, for example, training and public 
outreach, procedural analysis and reform). The legal team will interact 
and cooperate with other implementers selected to work on land 
administration reform, supporting their efforts to implement new land 
policy and assisting in problem resolution.
Systematic Regularization and Registration of Urban Land and 
Improvement of Rural Land Allocation Procedures
    This sub-activity will be implemented jointly by the LSPP/LAA and a 
land registration consulting firm that will support the efforts to 
conduct systematic regularization and registration of urban land rights 
(focusing on rights to land in informal settlements). The land 
registration consultant will provide the LSPP/LAA with technical 
assistance and material resources support (for example, temporary human 
resource and financial assistance) necessary to complete the systematic 
regularization and registration task in a timely manner. The LSPP/LAA 
will also develop and implement improvements in the procedures for 
recording rural land allocations and the maintenance of such records 
with technical assistance from the land registration consultant. The 
consultant, in cooperation with the public outreach consultant and 
other donor projects, will support the Ministry of Local Government's 
program for training of community councils and traditional authorities 
on land allocation procedures under the Law on Local Government of 1997 
and new procedures established as part of this activity.
Modernize and Improve Land Administration Procedures
    The main implementer of this sub-activity will be a land 
information systems consulting firm (``LIS Consultant''), which will 
work with the current land administration authorities and the Director 
of the new LAA to establish the LAA. Based on a study of land 
administration services and needs in Lesotho carried out with MCC 
Funding, the LIS Consultant will develop appropriate business 
processes, implement necessary software and hardware solutions, train 
LAA staff and management on new systems, and monitor the implementation 
of the new procedures and systems to ensure their efficiency and 
effectiveness in providing land administration services to private and 
public users. The LIS Consultant will cooperate closely with the land 
registration consultant and the legal consulting team to ensure that 
new processes meet the needs of public and private users and are 
properly established in the regulatory framework.
Public Outreach and Training
    The main implementer of this sub-activity will be an outreach and 
training consultant (an NGO), supported by a public education 
consultant. The consultants will be responsible for organizing all 
public outreach activities in support of the various activity 
implementers, including community councils and the LSPP/LAA. The 
consultants will draft an outreach and training strategy that meets the 
needs of the LAA and the implementers of each activity. For example, 
the consultants will cooperate with the LSPP/LAA to form a strategy for 
raising public awareness of the new LAA, the new simplified procedures 
and reduced costs for formalizing one's rights to land, and the 
benefits of formalizing land rights.
    (d) Civil Legal Reform Activity.
    The High Court will be the primary implementer of the civil legal 
reform Project activity, and will coordinate with the Ministry of 
Justice as appropriate. A consulting firm will be hired to provide a 
resident advisor for the first two years of the Project, and other 
short-term experts and support as required. The High Court will also 
involve other courts, the Law Society of Lesotho, representatives of 
the private sector and NGOs--in each case, in an advisory capacity--in 
planning and implementing all aspects of the Project. Compact 
Implementation Funding will be used to hire a consultant to develop a 
detailed implementation plan and to draft a scope of work for the 
consulting firm.
    (e) Training and Public Awareness to Support Gender Equality in 
Economic Rights.
    The training and public awareness to support gender equality in 
economic rights Project activities will be coordinated by the Ministry 
of Gender, Youth, Sports and Recreation as appropriate. Implementation 
will be carried out by one or two firms, with partners who have deep 
knowledge and experience of the context. This firm, or firms, will be 
selected after an international competition managed by MCA-Lesotho and 
tendered with the approval of MCC. The social/gender specialist 
employed by MCA-Lesotho will be charged with providing oversight and 
general guidance throughout the life of the contract. The social/gender 
specialist employed by MCA-Lesotho will meet regularly with the 
representative of the Ministry of Gender, Youth, Sports and Recreation 
to ensure that benchmarks are being met, the work plan is being 
followed and that results of the training and public awareness 
activities are being monitored.
3. Beneficiaries
    (a) Credit Bureau, National Identification Card and Payment and 
Settlement Systems Activity.
    All economically active (formal sector and informal sector) 
citizens and legal residents, including married women, are potential 
beneficiaries of these Project activities. The activities combine to 
improve the availability of credit and other financial services. There 
will be a significant reduction in transaction costs for financial 
institutions both in gathering the information needed to evaluate 
credit decisions and the cost of payments and settlement, which should 
result in a reduction in fees for these

[[Page 43403]]

services to clients. The payment and settlement system will likely put 
competitive pressures on the bank and non-bank service providers since 
many of the transactions for which they are now charging high fees 
(such as remittances) can eventually be provided by other parties 
unless they remain competitive in pricing and service provision.
    (b) Land Administration Reform Activity.
    The targeted beneficiaries of these Project activities are informal 
land occupants who now lack formalized rights to land and the security 
and economic benefits that derive from registered rights in land. All 
land occupants and right holders will benefit from the adoption of a 
new land policy that improves access to land and security of land 
rights. Improvements in land allocation and land record keeping 
procedures will also benefit all rural land occupants. These 
improvements will lead to the increased marketability of land, 
incentives to invest in land and the ability of land to be used to 
obtain credit. Private business will also benefit from these 
improvements by generating jobs and increased economic activity in 
sectors such as mortgage lending, construction, and real property 
related services (for example, estate agents, property valuers, and 
land surveyors).
    (c) Civil Legal Reform Activity.
    All active participants in the formal economy of Lesotho are 
intended beneficiaries of the civil legal reform Project activity. 
Initially, those economic actors most greatly impacted by the current 
backlog of High Court cases, such as banks, will benefit most directly. 
In addition, those individual citizens who now suffer from limited 
recourse to courts to settle their economic disputes will also be 
direct beneficiaries. With increasing access to formal justice, it is 
hoped that fewer individuals will simply accept unfair results from 
economic transactions or ``take the law into their own hands'' to 
settle disputes. Individual Basotho will also benefit by increased 
access to credit when banks are able to offer increased access to 
credit, as a result of easier processes developed to collect unpaid 
debts.
    (d) Training and Public Awareness to Support Gender Equality in 
Economic Rights.
    Because gender inequality can be a significant constraint to growth 
and poverty reduction, reducing the barriers to women's full 
participation as economic actors will benefit all members of Basotho 
society.
4. Donor Coordination; Role of Private Sector and Civil Society
    MCC has been actively collaborating with other donors on the NIDC 
system and the legal reform activities. MCC will work with the World 
Bank in the roll-out of the NIDC sub-activity. The World Bank has 
approved the engagement of an international consultant to determine the 
most effective and cost efficient approach to launch the NIDC. MCC 
will, upon approval of design and cost elements, assist with funding 
the roll-out.
    The development of the private sector development project relied on 
stakeholder steering committees and consultations with chambers of 
commerce, textile, and garment industry associations to provide 
feedback on the impediments to private sector growth and proposed 
solutions to improving the business and investment climate. In 
particular, there has been extensive consultation with the banking 
sector at all stages in establishing the need for and in designing the 
NIDC, credit bureau and payments and settlement systems sub-activities.
    The land administration reform activity has been discussed and 
continues to be discussed with the United Kingdom's Department for 
International Development (``DfID'') and the German development agency, 
Deutsche Gesellschaft fr Technische Zusammenarbeit (``GTZ''). These 
donors are currently active in Lesotho and have experience addressing 
land administration reform activities and related activities. In 
particular, project activities on improvement of land allocation 
practices in rural areas will be coordinated with GTZ and the 
establishment of the new LAA will be done in consultation with DfID. 
The land administration reform activities also include a significant 
role for the private sector and civil society. Private land surveyors 
will conduct land surveys as part of mass regularization and 
registration or urban land and public education and outreach activities 
will largely be implemented by an NGO.
5. USAID
    USAID does not currently have any financial and private sector 
development initiatives that focus specifically on the areas identified 
by MCC for funding in this Project.
6. Sustainability
    The credit bureau will be privately owned and private sector 
funded. Formation of a credit bureau has been consistently identified 
by credit grantors as a prerequisite to granting credit and the cross-
border solution selected is less expensive and more comprehensive than 
a ``Lesotho only'' credit bureau. The banks have indicated that they 
will become paying members of the credit bureau. The NIDC activity will 
be implemented by a third party and managed by the MoHA. A significant 
portion of the cost will be allocated to hiring experienced (third 
party) consulting experts to manage the implementation, providing 
technical expertise (hardware and software) and for training and 
capacity building for MoHA employees in an effort to assure 
sustainability.
    Sustainability is dependent largely on the participation of the 
four largest banks in Lesotho, three of which have South African 
parents and already send much of their clearing information to the 
South African ACH that would likely provide services to Lesotho. The 
fourth bank is the Post Bank, which is owned by the Government. As a 
result of the Government's choice to link with a regional payments 
provider and the consequential reduction in cost and broadening of 
payment options, the Central Bank of Lesotho has received assurances 
from each of the banks that they will be a participating (and paying) 
member of the ACH over the long term. It is also the Central Bank of 
Lesotho's intent to allow participation of indigenous financial 
institutions as they become credit worthy and have the capacity to 
become contributing members.
    A primary focus to ensure sustainability in the private sector 
development Project activities will be to fully realize the rights 
afforded to women under the Legal Capacity of Married Persons Act in 
each private sector development component. This will be done by 
integrating women and other individuals with no formal financial 
history or access to credit, land or litigation experience into each of 
the activities through targeted outreach and training. In addition, 
MCA-Lesotho will ensure that all activities are compliant with The 
Labor Code of 1992 which establishes the minimum age for employment at 
15.
    MCC funding will help establish sustainable improvements in land 
administration reform through an active capacity building, training, 
and public education effort. Each activity helps improve local capacity 
by training local stakeholders on all aspects of land administration 
and educating the public on processes involved in formalizing land 
rights and transferring rights to land using formal mechanisms. 
Establishment of a new land administration authority, with the

[[Page 43404]]

characteristics described in paragraph D1(c) of this Annex I, will 
raise capacity in land administration, ensuring that the LAA is capable 
of serving both private and public users of land information 
efficiently and cost effectively.
    Social safeguards and gender integration will be reviewed and 
monitored by the Social/Gender specialist in coordination with the MCA-
Lesotho officer responsible for environmental and social impact 
assessment (the ``ESI Officer'').
    The private sector development Project activity is not expected to 
result in adverse environmental impacts. However, the MCA-Lesotho ESI 
Officer will review terms of reference and work plans for all projects 
and activities to verify that potential environmental impacts are not 
anticipated. If necessary, the ESI Officer will act in accordance with 
the MCC Environmental Guidelines and applicable environmental laws and 
requirements in Lesotho to assess potential impacts, acquire the 
necessary environmental license and ensure the adequate mitigation is 
completed during implementation. The Government will be responsible for 
any environmental mitigation cost not included in the activity budgets.

Annex II Summary of Multi-Year Financial Plan

1. General

    The Multi-Year Financial Plan Summary below sets forth the 
estimated annual contribution of MCC Funding for Program 
administration, Program monitoring and evaluation, and implementing 
each Project. The Government's contribution of resources will consist 
of ``in-kind'' and other contributions or amounts required effectively 
to satisfy the requirements of Section 2.5(a) of this Compact. In 
accordance with the Program Implementation Agreement, the Government 
will develop and adopt on a quarterly basis a detailed financial plan 
(as approved by MCC) setting forth annual and quarterly funding 
requirements for the Program (including administrative costs) and for 
each project, projected both on a commitment and cash requirement 
basis.

2. Modifications

    To preserve administrative flexibility, the Parties may by written 
agreement (or as otherwise provided in the Program Implementation 
Agreement), without amending this Compact, change the designations and 
allocations of funds among the Projects, the Project activities, or any 
activity under Program administration or monitoring and evaluation, or 
between a Project identified as of Entry into Force and a new project; 
provided, however, that any such change (a) is consistent with the 
Objectives and the Program Implementation Agreement, (b) does not 
materially adversely affect the applicable Project or any activity 
under Program administration or monitoring and evaluation, (c) does not 
cause the amount of MCC Funding to exceed the aggregate amount 
specified in Section 2.1(a) of this Compact and (d) does not cause the 
Government's obligations or responsibilities or overall contribution of 
resources to be less than that specified in Section 2.5(a) of this 
Compact.

                                                            MULTI-YEAR FINANCIAL PLAN SUMMARY
                                                         [Totals including Contingencies (US$)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                 Project                   CIF  funding       Year 1          Year 2          Year 3          Year 4          Year 5           Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Water Sector Project
    A. Metolong Dam Bulk Water                 1,490,000       5,840,000       5,700,000      21,540,000      32,300,000       5,590,000      72,460,000
     Conveyance System..................
    B. Metolong Dam Program Management         1,390,000       1,590,000       1,590,000       3,160,000       3,250,000       3,330,000      14,310,000
     Unit Activity......................
    C. Urban and Peri-Urban Water              1,250,000       6,520,000       6,450,000      16,690,000       5,540,000       1,010,000      37,460,000
     Infrastructure Activity............
    D. WASA Project Implementation Unit.         459,000         459,000         918,000         918,000         918,000         918,000       4,590,000
    E. Rural Water Supply and Sanitation  ..............       5,900,000       7,550,000       5,740,000       5,330,000       5,720,000      30,240,000
     Infrastructure Activity............
    F. Wetlands Restoration and                  324,000         783,000       2,025,000       1,026,000         540,000         270,000       4,968,000
     Conservation Activity..............
                                         ---------------------------------------------------------------------------------------------------------------
        Subtotal........................       4,913,000      21,092,000      24,233,000      49,074,000      47,878,000      16,838,000     164,028,000
2. Health Sector Project
    A. Health Care Centers                     1,023,000      10,770,000      16,008,000      24,688,000      16,155,000       4,290,000      72,934,000
     Infrastructure Activity............
    B. ART Clinic Infrastructure                 238,000         922,000       1,393,000       1,393,000         696,000  ..............       4,642,000
     Activity...........................
    C. Central Lab Infrastructure.......  ..............  ..............         305,000       1,221,000       1,221,000         305,000       3,052,000
    D. Blood Transfusion Center.........  ..............         538,000         672,000       1,076,000         403,000  ..............       2,689,000

[[Page 43405]]

 
    E. National Health Training College   ..............         741,000       3,336,000       2,966,000         371,000  ..............       7,414,000
     Dormitory Infrastructure Activity..
    F. Health System Interventions               500,000       2,650,000       3,100,000       3,000,000       3,000,000       2,750,000      15,000,000
     Activity...........................
    G. Medical Waste Management.........          87,000       1,046,000       1,172,000         684,000         412,000         326,000       3,727,000
    H. Health PIU.......................       2,588,000       1,294,000       1,941,000       2,588,000       2,588,000       1,941,000      12,940,000
                                         ---------------------------------------------------------------------------------------------------------------
        Subtotal........................       4,436,000      17,961,000      27,927,000      37,616,000      24,846,000       9,612,000     122,398,000
3. Private Sector Development Project
    A. Civil Legal Reform Activity......          70,000         600,000         775,000         925,000         315,000         185,000       2,870,000
    B. National ID/Credit Bureau........          95,000       2,977,000       2,481,000       1,900,000       1,455,000       1,092,000      10,000,000
    C. Land Administration Reform                510,000       2,415,000       6,800,000       5,200,000       3,600,000       1,975,000      20,500,000
     Activity...........................
    D. Payment and Settlement System      ..............         800,000         600,000         300,000  ..............  ..............       1,700,000
     Activity...........................
    E. Gender Equality in Economic                35,000         350,000         250,000         200,000         100,000         100,000       1,035,000
     Rights Activity....................
                                         ---------------------------------------------------------------------------------------------------------------
        Subtotal........................         710,000       7,142,000      10,906,000       8,525,000       5,470,000       3,352,000      36,105,000
4. Monitoring and Evaluation
    Monitoring and Evaluation...........         500,000       2,605,000         684,000         755,000         664,000       2,600,000       7,808,000
                                         ---------------------------------------------------------------------------------------------------------------
        Subtotal........................         500,000       2,605,000         684,000         755,000         664,000       2,600,000       7,808,000
5. Program Management and Oversight
    A. MCA Lesotho......................       1,981,000       1,905,000       2,142,000       2,323,000       3,423,000       2,660,000      14,434,000
    B. Fiscal Agent \1\.................       1,250,000         740,000       1,250,000       1,570,000       1,375,000         475,000       6,660,000
    C. Procurement Agent \2\............       1,250,000         700,000       1,175,000       1,475,000       1,300,000         450,000       6,350,000
    D. Bank Contract....................           5,000           5,000           5,000           5,000           5,000           5,000          30,000
    E. Auditing.........................         623,000         623,000         623,000         623,000         623,000         623,000       3,738,000
    F. Environmental/Social Oversight     ..............         200,000         200,000         200,000         200,000         200,000       1,000,000
     (consultants)......................
                                         ---------------------------------------------------------------------------------------------------------------
        Subtotal........................       5,109,000       4,173,000       5,395,000       6,196,000       6,926,000       4,413,000      32,212,000
                                         ---------------------------------------------------------------------------------------------------------------
            Total Estimated MCC               15,668,000      52,973,000      69,145,000     102,166,000      85,784,000      36,815,000    362,551,000
             Contribution...............
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Health and Water Sector infrastructure costs include estimated costs for environmental/social studies and mitigation.

Annex III. Description of the Monitoring and Evaluation Plan

    This Annex III to this Compact (the ``M&E Annex'') generally 
describes the components of the plan to measure and evaluate progress 
toward achievement of the Compact Goal and the Objectives (the ``M&E 
Plan''). Except as defined in this M&E Annex, each capitalized term in 
this M&E Annex will have the same meaning given such term elsewhere in 
this Compact.

1. Overview

    MCC and the Government (or a mutually acceptable Government 
affiliate or a permitted designee of the Government) will formulate, 
agree to and the Government will implement, or cause to be implemented, 
an M&E Plan that specifies (a) how progress toward the Compact Goal, 
Objectives, and the intermediate results of each Project and Project 
activity set forth in this M&E Annex (the ``Outcomes'') will be 
monitored (the ``Monitoring Component''); (b) a methodology, process 
and timeline for the evaluation of planned, ongoing, or completed 
Projects and Project activities to determine their efficiency, 
effectiveness,

[[Page 43406]]

impact and sustainability (the ``Evaluation Component''); and (c) other 
components of the M&E Plan described below.
    Information regarding the Program's performance, including the M&E 
Plan, and any amendments or modifications thereto, as well as 
periodically generated reports, will be made publicly available on the 
MCA-Lesotho Web site and elsewhere. The Compact Goal, Objectives, and 
Outcomes of the Program can be summarized as follows:
[GRAPHIC] [TIFF OMITTED] TN03AU07.041

2. Monitoring Component

    To monitor progress toward the achievement of the Compact Goal, 
Objectives, and Outcomes, the Monitoring Component of the M&E Plan will 
identify (a) the Indicators (as defined below); (b) the party or 
parties responsible, the timeline, and the instrument for collecting 
data and reporting on each Indicator to MCA-Lesotho; and (c) the method 
by which the reported data will be validated.
    (a) Indicators. The M&E Plan will measure the impacts of the 
Program using objective and reliable information (``Indicators''). Each 
Indicator will have one or more expected values that specify the 
expected results and expected time for the impacts to be achieved 
(``Target''). The M&E Plan will measure and report on Indicators at 
four levels. First, the Indicator(s) at the Compact Goal level (``Goal 
Indicator'') will measure the impact of the overall Program and each 
Project. Second, the Indicators at the Objective level (``Objective 
Indicator'') will measure the final results of each of the Projects, 
including impacts on the intended beneficiaries identified in Annex I 
(collectively, the ``Beneficiaries''). Third, Indicators at the 
intermediate level (``Outcome Indicator'') will measure the results 
achieved under each of the Project activities and will provide an early 
measure of the likely impact under each of the Projects. A fourth level 
of Indicators (``Output Indicator'') will be included in the M&E Plan 
to measure the direct outputs of Project activities. Indicators will be 
disaggregated by sex, income level and age, to the extent practicable. 
Subject to prior written approval from MCC, MCA-Lesotho may add 
Indicators or modify the Targets of existing Indicators.

                               Compact Goal Indicators, Baselines and Targets \3\
----------------------------------------------------------------------------------------------------------------
                            Indicator                                Baseline         Year 5          Year 10
----------------------------------------------------------------------------------------------------------------
GDP growth (annual percent).....................................             1.4             5.1            6.75
GDP per capita (US$)............................................             688             788            1040
----------------------------------------------------------------------------------------------------------------
\3\ November 2006 International Monetary Fund Article IV Consultation Paper.


[[Page 43407]]


              Water Project Indicators and Definitions \4\
------------------------------------------------------------------------
Objective: ``Improve water supply for industrial and domestic needs, and
   enhance rural  livelihoods through improved watershed management''
-------------------------------------------------------------------------
                                                         Definition of
     Objective-level result            Indicator           Indicator
------------------------------------------------------------------------
Morbidity due to water borne      Incidence of water  Cases of diarrhea
 diseases is decreased.            and sanitation      reported to
                                   related diseases,   health
                                   nationally          facilities.\5\
                                   (number).
Jobs in garment industry are      Employment (in      Total factory
 retained/expanded.                water related       workers employed
                                   industries)         in Thetsane and
                                   (number).           Tikoe industrial
                                                       parks.
      Outcome-level Result
Urban domestic water supply is    Urban access to     Proportion of
 improved.                         potable water       urban customers
                                   supply (percent).   within 150 meters
                                                       from a water
                                                       supply.\6\
Bulk water supply to lowlands is  Flow delivered      The m\3\/year of
 increased.                        after treatment     water after
                                   at Metolong site    treatment at
                                   (m\3\/year).        Metolong site.
WASA operations are improved....  Unaccounted for     The percentage of
                                   urban water         urban water that
                                   (percent).          is not accounted
                                                       for (non-revenue
                                                       losses plus
                                                       physical
                                                       losses).\7\
Rural water supply is expanded..  Number of people    New people covered
                                   covered with MCC    per year in rural
                                   rural water         areas. Covered:
                                   supply (number).    within 150m
                                                       walking distance,
                                                       30l/person/day.
Rural sanitation is improved....  Number of new VIP   Total number of
                                   latrines provided   new VIP latrines
                                   to households       provided to
                                   (number).           households.\8\
------------------------------------------------------------------------
\4\ Note: the wetlands project will be monitored at the output level.
\5\ Diarrhea will serve as a proxy for all water borne diseases. This
  information will be disaggregated by urban and rural communities
  receiving intervention from MCC.
\6\ This will be disaggregated by WASA center.
\7\ Ibid.
\8\ This information will be disaggregated by District.


                  Water Project Indicators and Targets
------------------------------------------------------------------------
Objective: ``Improve water supply for industrial and domestic needs, and
   enhance rural  livelihoods through improved watershed management''
-------------------------------------------------------------------------
    Objective-level indicator          Baseline             Year 5
------------------------------------------------------------------------
Incidence of water and            55,045............  40,000.
 sanitation related diseases
 (number).
Employment (in water related      22,700............  40,000.
 industries) (number).
Outcome-level Indicator.........  Baseline..........  Year 5.
Urban access to potable water     55%...............  70%.
 supply (percent).
Flow delivered after treatment    0.................  7,640.
 at Metolong site (m\3\/year).
Unaccounted for urban water       27%...............  22%.
 (percent).
Number of people covered with     0.................  100,000.
 MCC rural water supply (number).
Number of new VIP latrines        0.................  10,000.
 provided to households (number).
------------------------------------------------------------------------


                Health Project Indicators and Definitions
------------------------------------------------------------------------
  Objective: Increase access to life-extending ART and essential health
          services by providing a sustainable delivery platform
-------------------------------------------------------------------------
                                       Indicator         Definition of
                                 --------------------      Indicator
     Objective-level result                          -------------------
                                    Mortality rate     Number of deaths
                                      (per 1000)         per 1000.\9\
------------------------------------------------------------------------
Lives are extended..............  People with HIV     Numerator: Number
                                   still alive 12      of individuals
                                   months after        still alive and
                                   initiation of       on therapy after
                                   treatment           initiating
                                   (percent).          treatment after
                                                       12 months.
                                                       Denominator:
                                                       Number of
                                                       individuals
                                                       initiating
                                                       treatment at the
                                                       same time.
                                  Prevalence of TB    Annual
                                   (per 100,000).      notification of
                                                       all forms of TB
                                                       per 100,000
                                                       population.\10\
      Outcome-level result
Quality of health service         Essential health    Percentage of
 delivery is improved.             services            facilities
                                   available           providing full
                                   (percent).          package of
                                                       standard services
                                                       for level of
                                                       center
                                                       disaggregated by
                                                       ownership.\11\
                                  TB treatment        Numerator: Number
                                   success rate        of patients smear
                                   (percent).          positive declared
                                                       cured + Number of
                                                       smear positive
                                                       patients who
                                                       completed
                                                       treatment.
                                                       Denominator:
                                                       Total number of
                                                       TB positive smear
                                                       cases (national
                                                       figures).
                                  Facilities staffed  Percentage of
                                   with standard       facilities
                                   number and type     staffed with
                                   of qualified        standard number
                                   staff (percent).    and type of
                                                       qualified staff
                                                       according to
                                                       level of facility
                                                       standard.\12\
Usage of health services is       Total patient       Total number of
 increased.                        visits (number).    patients treated
                                                       in health centers
                                                       in Lesotho.

[[Page 43408]]

 
                                  Immunization rate   Percent of
                                   (percent).          children under
                                                       one year of age
                                                       receiving measles
                                                       antigen
                                                       nationwide.
                                  Health centers      TBD.\13\
                                   deliveries.
                                  Total number of     Total number with
                                   people receiving    advanced HIV/AIDS
                                   ARV treatment       receiving ARV
                                   (number).           treatment per
                                                       year. \14\
Health centers are equipped and   Utility             Percent of health
 maintained at standards.          availability        facilities with
                                   (percent).          functioning
                                                       utilities. \15\
Health professionals are trained  Total annual        Number of students
 and retained.                     enrollment at       enrolled. \16\
                                   NHTC (number).
Laboratory services are improved  Referred tests      Average referred
                                   performed per       tests performed
                                   quarter (number).   at the central
                                                       laboratory per
                                                       quarter during
                                                       the past
                                                       year.\17\
Blood transfusion services are    Blood units         Average number of
 improved.                         collected per       blood units
                                   quarter (number).   collected per
                                                       quarter during
                                                       the past year.
------------------------------------------------------------------------
\9\ This information will be disaggregated by age and gender.
\10\ This information will be disaggregated by district, age and gender.
\11\ This information will be disaggregated by type of facility-MOHSW
  and CHAL. The summary statistic is the simple average.
\12\ Ibid.
\13\ This indicator definition still requires confirmation.
\14\ This information will be disaggregated by age and gender and health
  facility (health centers and hospitals).
\15\ This information will be disaggregated by electricity, water and
  communications.
\16\ This information will be disaggregated by gender and by area of
  study (e.g., general nursing, lab science, pharmacy technology, and
  midwifery).
\17\ This information will be disaggregated by test type: clinical
  chemistry, cytologty, histology (summary statistic is sum of types).


                  Health Project Indicators and Targets
------------------------------------------------------------------------
  Objective: Increase access to life-extending ART and essential health
          services by providing a sustainable delivery platform
-------------------------------------------------------------------------
     Objective-level result            Baseline             Year 5
------------------------------------------------------------------------
Mortality rate (per 1000).......  Under 5 = 113.....  Same as
                                  F:15-49 = 9.9.....   baseline.\18\
                                  M:15-49 = 12.3....
People with HIV still alive 12    82%...............  90%.
 months after initiation of
 treatment (percent).
Prevalence of TB (per 100,000)..  592...............  400.
Outcome-level result
Essential health services         TBD \19\..........  80%.
 available (percent).
TB treatment success rate         64%...............  85%.
 (percent).
Facilities staffed with standard  5%................  60%.
 number and type of qualified
 staff (percent).
Total patient visits (number)...  800,000...........  1,000,000.
Immunization rate (percent).....  78%...............  90%.
Number of people receiving ARV    17,966............  35,000.
 treatment (number).
Health centers deliveries.......  TBD...............  TBD.
Utility availability (percent)..  TBD \20\..........  90%.
Total annual enrollment at NHTC   350...............  938.
 (number).
Referred tests performed per      885...............  1,800.
 quarter (number).
Blood units collected per         700...............  1,500.
 quarter (number).
------------------------------------------------------------------------
\18\ Mortality rates would increase in the absence of MCC's
  intervention.
\19\ Baseline should be available with the results of the accreditation
  exercise--expected to be completed by August 2007.
\20\ Ibid.


                 PSD Project Indicators and Definitions
------------------------------------------------------------------------
    Objective: ``Stimulate investment by improving access to credit,
 reducing transaction costs and increasing the participation of women in
                              the economy''
-------------------------------------------------------------------------
                                                         Definition of
     Objective-level result            Indicator        Indicator \21\
------------------------------------------------------------------------
Increased private sector          Value of            ..................
 economic activity.                investment
                                   (million maluti).
                                  Value of credit     ..................
                                   extended (million
                                   maluti).
      Outcome-level Results
Access to credit is expanded....  Private credit      The percentage of
                                   bureau coverage     the adult
                                   (percent).          population listed
                                                       by a private
                                                       credit bureau
                                                       with current
                                                       information on
                                                       repayment
                                                       history, unpaid
                                                       debts or credit
                                                       outstanding.

[[Page 43409]]

 
Utilization of electronic funds   Domestic            Total number of
 transfer is increased.            electronic funds    payments
                                   transfers           associated with
                                   (number).           salaries and
                                                       pensions made
                                                       through EFT per
                                                       year. \22\
Use of land as collateral is      Land used as        Total annual
 increased.                        collateral          number of
                                   (number).           mortgage bonds
                                                       registered.
                                  Land transactions   Official costs
                                   costs (percent of   required by law
                                   property value).    for businesses to
                                                       purchase land and
                                                       a building to
                                                       transfer the
                                                       property title
                                                       from the seller
                                                       to the buyer so
                                                       that the buyer
                                                       can use the
                                                       property for
                                                       expanding its
                                                       business, as
                                                       collateral in
                                                       taking new loans
                                                       or, if necessary,
                                                       to sell to
                                                       another business.
Use of land as collateral is      Land transactions   The median
 increased.                        times (days).       duration that
                                                       property lawyers
                                                       or registry
                                                       officials
                                                       indicate is
                                                       necessary to
                                                       complete a
                                                       procedure.
Commercial dispute resolution is  Pending civil       Total number of
 increased.                        cases (number).     pending civil
                                                       cases in the High
                                                       Court.
Knowledge, attitudes, and         Gender equality     Percent change in
 practices of women's economic     index.              index of
 rights are improved.                                  knowledge,
                                                       attitudes, and
                                                       practices for
                                                       supporting gender
                                                       equality in
                                                       economic rights.
------------------------------------------------------------------------
\21\ These indicator definitions still require confirmation.
\22\ This number will be disaggregated by salaries and pensions paid by
  government agencies.


                   PSD Project Indicators and Targets
------------------------------------------------------------------------
    Objective: ``Stimulate investment by improving access to credit,
 reducing transaction costs and increasing the participation of women in
                              the economy''
-------------------------------------------------------------------------
   Objective level indicators       Baseline \23\           Year 5
------------------------------------------------------------------------
Value of investment (million     TBD................  TBD.
 maluti).
Value of credit extended         TBD................  TBD.
 (million maluti).
Outcome Level Indicators
Private credit bureau coverage   0%.................  13%.
 (percent).
Domestic electronic funds        0..................  200,000.
 transfers (number).
Land used as collateral          108................  430.
 (number).
Land transactions costs          8.40%..............  4.20%.
 (percent of property value).
Land transactions times (days).  101\24\............  30.
Pending civil cases (number)...  1031...............  600.
Gender equality index..........  TBD\25\............  TBD.
------------------------------------------------------------------------
\23\ These indicator baselines and targets still require confirmation.
\24\ This baseline figure is based on the World Bank's ``Doing
  Business'' report. As the deeds registry improves its data management,
  the baseline will be revised according to deeds registry figures.
\25\ A baseline survey is planned before the end of Year 1.

    (b) Data Collection and Reporting. The M&E Plan will establish 
guidelines for data collection and a reporting framework, including a 
schedule of Program reporting and responsible parties. The management 
of MCA-Lesotho will conduct regular assessments of Program performance 
to inform the MCA-Lesotho board of directors and MCC of progress under 
the Program and to alert these parties to any problems. These 
assessments will report the actual results compared to the Targets on 
the Indicators referenced in the Monitoring Component, explain 
deviations between these actual results and Targets, and in general, 
serve as a management tool for implementation of the Program. With 
respect to any data or reports received by MCA-Lesotho, MCA-Lesotho 
will promptly deliver such reports to MCC along with any other related 
documents, as specified in the M&E Plan or as may be requested from 
time to time by MCC.
    (c) Data Quality Reviews. As determined in the M&E Plan or as 
otherwise requested by MCC, the quality of the data gathered through 
the M&E Plan will be reviewed to ensure that data reported are as 
reliable, timely and valid as resources will allow. The objective of 
any data quality review will be to verify the quality and the 
consistency of performance data, across different implementation units 
and reporting institutions. Such data quality reviews also will serve 
to identify where consistent levels of quality are not possible, given 
in-country capacity or other constraints. MCA-Lesotho will enter into 
an agreement (in a form acceptable to MCC) with the Reviewer to fulfill 
the provisions set forth in Section 1 of this Annex III and this clause 
(c).

3. Evaluation Component

    The Program will be evaluated on the extent to which the 
interventions contribute to the Compact Goal. The Evaluation Component 
of the M&E Plan will contain a methodology, process and timeline for 
collecting and analyzing data in order to assess planned, ongoing, or 
completed Project activities to determine their efficiency, 
effectiveness, impact and sustainability. The evaluations should use 
state-of-the-art methods for addressing selection bias.

[[Page 43410]]

The Government will implement, or cause to be implemented, surveys to 
collect longitudinal data on both Beneficiary and non-Beneficiary 
households. The Evaluation Component will contain two types of reports: 
Final Evaluations and Ad Hoc Evaluations (each as defined below), and 
will be finalized before any Disbursement for specific Project 
activities or the Program.
    (a) Final Evaluation. MCA-Lesotho will engage an independent 
evaluator to conduct a program evaluation at the expiration or 
termination of the Program (``Final Evaluation''). The evaluation 
methodology, timeline, data collection, and analysis requirements will 
be finalized and detailed in the M&E Plan. The Final Evaluations must 
at a minimum (i) estimate quantitatively and in a statistically valid 
way, the causal relationship between the Compact Goals (to the extent 
possible), the Objectives and Outcomes; (ii) determine if and analyze 
the reasons why the Compact Goals, Objectives and Outcomes were or were 
not achieved; and (iii) assess the overlapping benefits of the 
Projects.
    (b) Ad Hoc Evaluations or Special Studies. Either MCC or MCA-
Lesotho may request ad hoc or interim evaluations or special studies of 
Projects, Project activities, or the Program as a whole prior to the 
expiration of the Compact Term (each, an ``Ad Hoc Evaluation''). If 
MCA-Lesotho engages an evaluator for an Ad Hoc Evaluation, the 
evaluator will be an externally contracted independent source selected 
by MCA-Lesotho, subject to the prior written approval of MCC, following 
a tender in accordance with the MCC Program Procurement Guidelines, and 
otherwise in accordance with any relevant Implementation Letter, the 
Program Implementation Agreement or any other agreement or arrangement 
entered into by the Government in connection with this Compact or the 
Program. If MCA-Lesotho requires an ad hoc independent evaluation or 
special study at the request of the Government for any reason, 
including for the purpose of contesting an MCC determination with 
respect to a Project or Project activity or seeking funding from other 
donors, no MCC Funding or MCA-Lesotho resources may be applied to such 
evaluation or special study without MCC's prior written approval.

4. Other Components of the M&E Plan

    In addition to the Monitoring Components and the Evaluation 
Components, the M&E Plan will include the following components for the 
Program, Projects and Project activities, including, where appropriate, 
roles and responsibilities of the relevant parties and Providers:
    (a) Costs. A detailed annual budget estimate for all components of 
the M&E Plan.
    (b) Assumptions and Risks. Any assumptions and risks external to 
the Program that underlie the accomplishment of the Objectives and 
Outcomes; provided such assumptions and risks will not excuse 
performance of the Parties, unless otherwise expressly agreed to in 
writing by the Parties.

5. Implementation of the M&E Plan

    (a) Approval and Implementation. The approval and implementation of 
the M&E Plan, as amended from time to time, will be in accordance with 
this M&E Annex, the Program Implementation Agreement or any other 
agreement or arrangement entered into by the Government in connection 
with this Compact or the Program.
    (b) Stakeholders Committee. The completed portions of the M&E Plan 
will be presented to the stakeholders committee formed in accordance 
with the Guidelines for Accountable Entities and Implementation 
Structures provided on the MCC Web site at such stakeholders 
committee's initial meeting, and any amendments or modifications to and 
any additional components of the M&E Plan will be presented to such 
stakeholders committee at appropriate subsequent meetings of such 
committee. Such stakeholders committee will have the opportunity to 
present its suggestions to the M&E Plan, which the board of directors 
of MCA-Lesotho will take into consideration in its review of any 
amendments to the M&E Plan during the Compact Term.
    (c) Disbursement for a Project Activity. As a condition to each 
Disbursement there will be satisfactory progress on the M&E Plan for 
the relevant Project or Project activity, and substantial compliance 
with the M&E Plan, including any reporting requirements. In addition, 
for certain activities, collection of baseline data may be a condition 
precedent for specified Disbursements.
    (d) Modifications. Notwithstanding anything to the contrary 
contained in this Compact, including the requirements of this M&E 
Annex, the Parties may modify or amend the M&E Plan or any component 
thereof, including those elements described herein, without amending 
this Compact; provided, however, that any such modification or 
amendment of the M&E Plan is reviewed by the stakeholders committee 
referenced in clause (b) above and has been approved by MCC in writing 
and is otherwise consistent with the requirements of this Compact and 
its Objectives, the Program Implementation Agreement and any other 
relevant agreement or arrangement entered into by the Government in 
connection with this Compact or the Program.

 [FR Doc. E7-14812 Filed 8-2-07; 8:45 am]
BILLING CODE 9211-03-P