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


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MILLENNIUM CHALLENGE CORPORATION

[MCC FR 07-10]


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

AGENCY: Millennium Challenge Corporation.

ACTION: Notice.

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

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

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

A. Introduction

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

B. Program Overview and Budget

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

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


[[Page 52915]]

C. Program Description

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

[[Page 52916]]

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

D. Impacts

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

E. Program Management

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

[[Page 52917]]

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

F. Assessment

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

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

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

G. Donor Coordination

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

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

Table of Contents

Article 1. Goal and Objectives
    Section 1.1 Compact Goal
    Section 1.2 Program Objective
    Section 1.3 Project Objectives
Article 2. Funding and Resources
    Section 2.1 MCC Funding
    Section 2.2 Compact Implementation Funding
    Section 2.3 Disbursement
    Section 2.4 Interest
    Section 2.5 Government Resources; Budget
    Section 2.6 Limitations on the Use of MCC Funding
    Section 2.7 Taxes
Article 3. Implementation
    Section 3.1 Program Implementation Agreement
    Section 3.2 Government Responsibilities
    Section 3.3 Policy Performance
    Section 3.4 Government Assurances
    Section 3.5 Implementation Letters
    Section 3.6 Procurement
    Section 3.7 Records; Accounting; Covered Providers; Access
    Section 3.8 Audits; Reviews
Article 4. Communications
    Section 4.1 Communications
    Section 4.2 Representatives
    Section 4.3 Signatures
Article 5. Termination; Suspension; Refunds
    Section 5.1 Termination; Suspension
    Section 5.2 Refunds; Violation
    Section 5.3 Survival
Article 6. Compact Annexes; Amendments; Governing Law

[[Page 52918]]

    Section 6.1 Annexes
    Section 6.2 Inconsistencies
    Section 6.3 Amendments
    Section 6.4 Governing Law
    Section 6.5 Additional Instruments
    Section 6.6 References to MCC Web site
    Section 6.7 References to Laws, Regulations, Policies and 
Guidelines
Article 7. Entry Into Force
    Section 7.1 Domestic Requirements
    Section 7.2 Conditions Precedent to Entry Into Force
    Section 7.3 Date of Entry Into Force
    Section 7.4 Compact Term
    Section 7.5 Provisional Application
Annex I: Program Description
Annex II: Summary of the Multi-Year Financial Plan
Annex III: Description of the Monitoring and Evalutaion Plan

Millennium Challenge Compact

Preamble

    This Millennium Challenge Compact (this ``Compact'') is between the 
United States of America, acting through the Millennium Challenge 
Corporation, a United States government corporation (``MCC''), and the 
Government (the ``Government'') of the Kingdom of Morocco (``Morocco'') 
(individually a ``Party'' and collectively, the ``Parties'').
    Recalling that the Government submitted to MCC a proposal based on 
development priorities determined in national and regional 
consultations and integrated with the national growth strategy 
(including, inter alia, the Plan Emergence), which seeks to stimulate 
economic growth by increasing productivity and improving employment in 
high potential sectors; and
    Recognizing that MCC wishes to help Morocco implement a program to 
achieve the goal and objectives described herein (the ``Program'');
    The Parties hereby agree as follows:

Article 1. Goal and Objectives

Section 1.1 Compact Goal
    The goal of this Compact is to reduce poverty in Morocco through 
economic growth (the ``Compact Goal'').
Section 1.2 Program Objective
    The objective of the Program is to stimulate economic growth by 
increasing productivity and improving employment in high potential 
sectors (the ``Program Objective'').
Section 1.3 Project Objectives
    The objectives of the Projects (each, a ``Project Objective'' and 
collectively, the ``Project Objectives'') are:
    (a) To stimulate growth in the agricultural sector and reduce 
volatility of agricultural production by accelerating the 
transformation from annual crops, notably cereals, to more productive 
perennial tree crops, such as olives, almonds, figs and dates;
    (b) to transform the small-scale fishing sector by modernizing the 
means of catching, storing, and marketing fish to improve the quality 
of the catch, maintain the value chain and increase access to local and 
export markets, and to assure the sustainable use of fish resources;
    (c) to increase value to the tourism and artisan sectors through 
leveraging the links between the craft sector and tourism; to expand 
the quality of and improve access to artisan, literacy and vocational 
training; and to increase the value of the cultural, historic and 
architectural resources of the Fez Medina;
    (d) to increase financial services for micro-enterprises in Morocco 
by addressing the key constraints to the development of a broader, 
deeper, market-based financial sector; and
    (e) to improve the outcomes of existing high priority government 
initiatives, Moukalawati and the National Initiative for Human 
Development (Initiative National pour le D[eacute]veloppement Humain, 
or ``INDH'') increasing the sustainability of young businesses created 
with their assistance.
    The Government will take all the steps necessary or appropriate to 
achieve the Program Objective and Project Objectives during the Compact 
Term (as defined in Section 7.4).

Article 2. Funding and Resources

Section 2.1 MCC Funding
    MCC grants to the Government, under the terms of this Compact, an 
amount not to exceed Six Hundred Ninety-Seven Million, Five Hundred 
Thousand United States Dollars (US$697,500,000) (``MCC Funding'') to 
help the Government implement the Program as more specifically set 
forth in Annex II of this Compact.
Section 2.2 Compact Implementation Funding
    (a) Of the total amount of MCC Funding, MCC will make available to 
the Government up to Thirty-Two Million, Four Hundred Thousand United 
States Dollars (US$32,400,000) (``Compact Implementation Funding'') 
under Section 609(g) of the Millennium Challenge Act of 2003 for:
    (i) feasibility and design studies, strategic environmental (and 
social) assessments, environmental impact assessments, environmental 
assessments, environmental management plans and resettlement action 
plans for projects and activities included in the Program;
    (ii) financial management and procurement activities;
    (iii) monitoring and evaluation activities;
    (iv) administration activities, including salaries and 
administrative support expenses such as rent, information technology, 
and other capital expenditures; and
    (v) other Program implementation activities approved by MCC.
    (b) Compact Implementation Funding is subject to (i) the 
limitations on the use or treatment of MCC Funding set forth in 
Sections 2.6 and 2.7 and (ii) any other requirements and limitations as 
may be notified to the Government by MCC in writing.
Section 2.3 Disbursement
    In accordance with this Compact and the Program Implementation 
Agreement (as defined in Section 3.1), MCC will disburse MCC Funding 
for expenditures incurred pursuant to the Program (each, a 
``Disbursement''). The Disbursements will be made available to the 
Government, at MCC's sole election, by (a) deposit to one or more bank 
accounts established by the Government and acceptable to MCC (each, a 
``Permitted Account'') or (b) direct payment to a provider of goods, 
works or services required to implement the Program.
Section 2.4 Interest
    The Government will pay to MCC interest and other earnings that 
accrue on MCC Funding on deposits in the Permitted Accounts in 
accordance with the Program Implementation Agreement (including by 
directing such payments to a bank account that MCC may from time to 
time indicate).
Section 2.5 Government Resources; Budget
    (a) The Government will provide all funds and other resources, and 
will take all actions, that are necessary to carry out the Government's 
responsibilities and obligations under this Compact.
    (b) The Government will use its best efforts to ensure that all MCC 
Funding it receives or is projected to receive in each fiscal year is 
fully accounted for in its annual budget on a multi-year basis.
    (c) The Government will not reduce the normal and expected 
resources that it would otherwise receive or budget from sources other 
than MCC for the activities contemplated under this Compact and the 
Program or for activities comparable to those contemplated under this 
Compact or the Program.
    (d) Unless the Government discloses otherwise to MCC in writing, 
MCC Funding will be in addition to the

[[Page 52919]]

resources that the Government would otherwise receive or budget for the 
activities contemplated under this Compact and the Program or for 
activities comparable to those contemplated under this Compact or the 
Program.
Section 2.6 Limitations on the Use of MCC Funding
    The Government will ensure that MCC Funding will not be used for 
any purpose that would violate United States law or policy, as 
specified in this Compact or as further notified by MCC to the 
Government in writing or posted on the MCC Web site at www.mcc.gov 
(``MCC Web site''), including but not limited to the following 
purposes:
    (a) for assistance to, or training of, the military, police, 
militia, national guard or other quasi-military organization or unit;
    (b) for any activity that is likely to cause a substantial loss of 
United States jobs or a substantial displacement of United States 
production;
    (c) to undertake, fund or otherwise support any activity that is 
likely to cause a significant environmental, health, or safety hazard 
as further described in environmental guidelines delivered by MCC to 
the Government or posted on the MCC Web site (the ``MCC Environmental 
Guidelines''); or
    (d) to pay for the performance of abortions as a method of family 
planning or to motivate or coerce any person to practice abortions, to 
pay for the performance of involuntary sterilizations as a method of 
family planning or to coerce or provide any financial incentive to any 
person to undergo sterilizations or to pay for any biomedical research 
which relates, in whole or in part, to methods of, or the performance 
of, abortions or involuntary sterilization as a means of family 
planning.
Section 2.7 Taxes
    (a) Unless the Parties otherwise specifically agree in writing, the 
Government will ensure that each of the following is free from the 
payment of any existing or future taxes, duties, levies, contributions 
or other similar charges (``Taxes'') of or in Morocco (including any 
such Taxes of a national, regional, local or other governmental or 
taxing authority): (i) The Program; (ii) MCC Funding; (iii) interest or 
earnings on MCC Funding; (iv) any Project or activity implemented under 
the Program; (v) goods, works, services, technology and other assets 
and activities under the Program or any Project; (vi) persons and 
entities that provide such goods, works, services, technology and 
assets or perform such activities; and (vii) income, profits and 
payments with respect thereto. The Parties acknowledge and agree that 
the foregoing includes, inter alia, value added and other transfer 
taxes, profit and income taxes, property and ad valorem taxes, and 
import and export duties and taxes (including for goods imported and 
re-exported for personal use), withholding taxes and payroll taxes.
    (b) Before any Disbursement, the Government and MCC may, at MCC's 
discretion, enter into one or more agreements setting forth the 
mechanisms for implementing this Section 2.7, including (i) waivers of 
certain filing and compliance requirements relating to Taxes, and (ii) 
an agreement on exceptions to paragraph (a) above for (1) Taxes on and 
contributions for certain individuals who are nationals or permanent 
residents of Morocco, (2) Taxes (other than transfer Taxes and import 
and export Taxes) on certain entities that are organized under the laws 
of Morocco, and (3) fees or charges for services that are generally 
applicable in Morocco, reasonable in amount and imposed on a non-
discriminatory basis.
    (c) If a Tax has been levied and paid contrary to the requirements 
of this Section 2.7 or any agreement entered into pursuant to this 
Section 2.7, whether inadvertently, due to the impracticality of 
implementation of this Section 2.7 with respect to certain types or 
amounts of taxes, or otherwise, the Government will refund promptly to 
MCC the amount of such Tax in United States Dollars (``US$'') or 
Moroccan Dirham (``MAD'') within thirty (30) days (or such other period 
as may be agreed in writing by the Parties) after the Government is 
notified in writing of such levy and tax payment, whether by MCC or 
otherwise; provided, however, that no MCC Funding, proceeds thereof or 
Program assets may be applied by the Government in satisfaction of its 
obligations under this paragraph.

Article 3. Implementation

Section 3.1 Program Implementation Agreement
    The Government will implement the Program in accordance with this 
Compact and as further specified in an agreement to be entered into by 
MCC and the Government relating to, among other matters, implementation 
arrangements, fiscal accountability, disbursement and use of MCC 
Funding, procurement and applicable tax exemptions (the ``Program 
Implementation Agreement'' or ``PIA'').
Section 3.2 Government Responsibilities
    (a) The Government has the principal responsibility to oversee and 
manage the implementation of the Program.
    (b) With the prior written consent of MCC, the Government may 
designate an entity to implement some or all of the Government's 
obligations or to exercise any rights of the Government under this 
Compact or the PIA. Such a designation will not relieve the Government 
of any designated obligations and rights, for which the Government will 
retain full responsibility.
    (c) The Government will ensure that no law or regulation in Morocco 
now or hereinafter in effect makes or will make unlawful or otherwise 
prevent or hinder the performance of any obligation under this Compact, 
the PIA or any other related agreement or any transaction contemplated 
hereby or thereby.
    (d) The Government will ensure that any assets or services funded 
in whole or in part (directly or indirectly) by MCC Funding will be 
used solely to implement the Program unless otherwise agreed by MCC in 
writing.
Section 3.3 Policy Performance
    In addition to undertaking the specific policy and legal reform 
commitments identified in Annex I of this Compact, the Government will 
seek to maintain and to improve its level of performance under the 
policy criteria identified in Section 607 of the Millennium Challenge 
Act of 2003 and the selection criteria and methodology used by MCC.
Section 3.4 Government Assurances
    The Government assures MCC that:
    (a) As of the date this Compact is signed by the Government, the 
information provided to MCC by or on behalf of the Government in the 
course of reaching agreement with MCC on this Compact is true, correct 
and complete in all material respects;
    (b) this Compact does not, and will not, conflict with any other 
international agreement or obligation of the Government or any 
legislation of Morocco; and
    (c) the Government will not invoke any of the provisions of its 
internal law to justify or excuse a failure to perform its duties or 
responsibilities under this Compact.
Section 3.5 Implementation Letters
    As necessary, MCC may provide guidance consistent with the terms 
and conditions of this Compact to the Government in writing on any 
matter relating to this Compact, MCC Funding or the implementation of 
the Program (each, an ``Implementation Letter''). The

[[Page 52920]]

Government will apply such guidance in implementing the Program.
Section 3.6 Procurement
    The Government will ensure that the procurement of all goods, works 
and services by the Government or any Provider (as defined in Section 
3.7(c)) to implement the Program will be consistent with the 
procurement guidelines notified by MCC to the Government in writing or 
by posting on the MCC Web site, or otherwise made publicly available 
(the ``MCC Program Procurement Guidelines''), which will include, among 
others, the following requirements:
    (a) Open, fair, and competitive procedures must be used in a 
transparent manner to solicit, award and administer contracts and to 
procure goods, works and services;
    (b) solicitations for goods, works, and services must be based upon 
a clear and accurate description of the goods, works and services to be 
acquired;
    (c) contracts must be awarded only to qualified contractors that 
have the capability and willingness to perform the contracts in 
accordance with their terms on a cost effective and timely basis; and
    (d) no more than a commercially reasonable price, as determined, 
for example, by a comparison of price quotations and market prices, 
will be paid to procure goods, works and services.
Section 3.7 Records; Accounting; Covered Providers; Access
    (a) Government Books and Records. The Government will maintain, and 
will use its best efforts to ensure that all Covered Providers (as 
defined in subsection (c) below) maintain, accounting books, records, 
documents and other evidence relating to the Program adequate to show 
to MCC's satisfaction the use of all MCC Funding (``Compact Records''). 
In addition, the Government will furnish or cause to be furnished to 
MCC upon its request all such Compact Records.
    (b) Accounting. The Government will maintain, and will use its best 
efforts to ensure that all Covered Providers maintain, Compact Records 
in accordance with generally accepted accounting principles prevailing 
in the United States, or at the Government's option and with MCC's 
prior written approval, other accounting principles, such as those (i) 
prescribed by the International Accounting Standards Committee (an 
affiliate of the International Federation of Accountants) or (ii) then 
prevailing in Morocco. Compact Records must be maintained for at least 
five (5) years after the end of the Compact Term or for such longer 
period, if any, required to resolve any litigation, claims or audit 
findings or any statutory requirements.
    (c) Providers and Covered Providers. Unless the Parties agree 
otherwise in writing, a ``Provider'' is (i) any entity of the 
Government that receives or uses MCC Funding or any other Program asset 
in carrying out activities to implement the Program or (ii) any third 
party that receives at least US$50,000 in the aggregate of MCC Funding 
(other than as salary or compensation as an employee of an entity of 
the Government) during the Compact Term. A ``Covered Provider'' is (i) 
a non-United States Provider that receives (other than pursuant to a 
direct contract or agreement with MCC) US$300,000 or more of MCC 
Funding in any Government fiscal year or any other non-United States 
person or entity that receives, directly or indirectly, US$300,000 or 
more of MCC Funding from any Provider in such fiscal year, or (ii) any 
United States Provider that receives (other than pursuant to a direct 
contract or agreement with MCC) US$500,000 or more of MCC Funding in 
any Government fiscal year or any other United States person or entity 
that receives, directly or indirectly, US$500,000 or more of MCC 
Funding from any Provider in such fiscal year.
    (d) Access. Upon MCC's request, the Government, at all reasonable 
times, will permit, or cause to be permitted, authorized 
representatives of MCC, an authorized United States inspector general, 
the United States Government Accountability Office, any auditor 
responsible for an audit contemplated herein or otherwise conducted 
pursuant to this Compact, and any agents or representatives engaged by 
MCC or the Government to conduct any assessment, review or evaluation 
of the Program, the opportunity to audit, review, evaluate or inspect 
facilities and activities funded in whole or in part by MCC Funding.
Section 3.8 Audits; Reviews
    (a) Government Audits. Except as the Parties may otherwise agree in 
writing, the Government will, on at least a semi-annual basis, conduct, 
or cause to be conducted, financial audits of all disbursements of MCC 
Funding through the end of the Compact Term, in accordance with the 
terms of the Program Implementation Agreement. As requested by MCC in 
writing, the Government will use, or cause to be used, to conduct such 
audits an auditor approved by MCC and named on the list of local 
auditors approved by the Inspector General of MCC (the ``Inspector 
General'') or a United States-based certified public accounting firm 
selected in accordance with the ``Guidelines for Financial Audits 
Contracted by MCA'' (the ``Audit Guidelines'') issued and revised from 
time to time by the Inspector General, which are posted on the MCC Web 
site. Audits will be performed in accordance with the Audit Guidelines 
and be subject to quality assurance oversight by the Inspector General. 
An audit must be completed and the audit report delivered to MCC no 
later than 90 days after the first period to be audited and no later 
than 90 days after each June 30 and December 31 thereafter, or such 
other period as the Parties may otherwise agree in writing.
    (b) Audits of United States Entities. The Government will ensure 
that agreements between the Government or any Provider, on the one 
hand, and a United States nonprofit organization, on the other hand, 
that are financed with MCC Funding state that the United States 
nonprofit organization is subject to the applicable audit requirements 
contained in the United States Office of Management and Budget 
(``OMB'') Circular A-133. The Government will ensure that agreements 
between the Government or any Provider, on the one hand, and a United 
States for-profit Covered Provider, on the other hand, that are 
financed with MCC Funding state that the United States for-profit 
organization is subject to audit by the cognizant United States 
Government agency, unless the Government and MCC agree otherwise in 
writing.
    (c) Corrective Actions. The Government will use its best efforts to 
ensure that Covered Providers take, where necessary, appropriate and 
timely corrective actions in response to audits, consider whether a 
Covered Provider's audit necessitates adjustment of the Government's 
records, and require each such Covered Provider to permit independent 
auditors to have access to its records and financial statements as 
necessary.
    (d) Audit by MCC. MCC will have the right to arrange for audits of 
the Government's use of MCC Funding.
    (e) Cost of Audits, Reviews or Evaluations. MCC Funding may be used 
to fund the costs of any audits, reviews or evaluations required under 
this Compact.

Article 4. Communications

Section 4.1 Communications
    Any document or communication required or submitted by either Party 
to the other under this Compact must be in writing and, except as 
otherwise agreed

[[Page 52921]]

by the Parties, in English. For this purpose, the address of each Party 
is set forth below.

To MCC:

    Millennium Challenge Corporation, Attention: Vice President for 
Operations (with a copy to the Vice President and General Counsel), 875 
Fifteenth Street, NW., Washington, DC 20005, United States of America, 
Facsimile: +1(202) 521-3700, Telephone: +1(202) 521-3600, E-mail: 
[email protected] (Vice President for Operations), 
[email protected] (Vice President and General Counsel).

To the Government:

    Government of the Kingdom of Morocco, Attention: Prime Minister 
(with a copy to the Minister of Finance), Primature, Palais Royal, 
Touarga, Rabat, Royaume du Maroc, Facsimile: +(212) 037 768 656, 
Telephone : +(212) 037 219 400, E-mail: [email protected].

With a copy to:

    Ministry of Finance & Privatization, Attn: Minister of Finance, Bd. 
Med V. Quartier AdministratifRabat--Chellah, Royaume du Maroc, 
Facsimile: +(212) 037.76.40.81, Telephone: +(212) 037.76.06.61/
037.76.55.04, E-mail: [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 of the Government, and MCC will be represented 
by the individual holding the position of, or acting as, Vice President 
for Operations of MCC (each, a ``Principal Representative''), each of 
whom, by written notice to the other Party, may designate one or more 
additional representatives for all purposes other than signing 
amendments to this Compact. A Party may change its Principal 
Representative to a new representative that holds a position of equal 
or higher rank upon written notice to the other Party.
Section 4.3 Signatures
    With respect to all documents other than this Compact or an 
amendment to this Compact, a signature delivered by facsimile or 
electronic mail will be binding on the Party delivering such signature 
to the same extent as an original signature would be.

Article 5. Termination; Suspension; Refunds

Section 5.1 Termination; Suspension
    (a) Either Party may terminate this Compact in its entirety by 
giving the other Party thirty (30) days' written notice.
    (b) MCC may, immediately upon written notice to the Government, 
suspend or terminate this Compact or MCC Funding, in whole or in part, 
and any obligation related thereto, if MCC determines that any 
circumstance identified by MCC as a basis for suspension or termination 
(whether in writing to the Government or by posting on the MCC Web 
site) has occurred, which circumstances include but are not limited to 
the following:
    (i) The Government fails to comply with its obligations under this 
Compact, the PIA or any other agreement or arrangement entered into by 
the Government in connection with this Compact or the Program;
    (ii) an event or series of events has occurred that MCC determines 
makes it improbable that the Program Objective or any of the Project 
Objectives will be achieved during the Compact Term or that the 
Government will be able to perform its obligations under this Compact;
    (iii) a use of MCC Funding or continued implementation of the 
Program violates or would violate applicable law or United States 
Government policy, whether now or hereafter in effect;
    (iv) the Government or any other person or entity receiving MCC 
Funding or using assets financed in whole or in part with MCC Funding 
is engaged in activities that are contrary to the national security 
interests of the United States;
    (v) an act has been committed or an omission or an event has 
occurred that would render Morocco ineligible to receive United States 
economic assistance under Part I of the Foreign Assistance Act of 1961 
(22 U.S.C. 2151 et seq.), by reason of the application of any provision 
of the Foreign Assistance Act of 1961 or any other provision of law;
    (vi) the Government has engaged in a pattern of actions 
inconsistent with the criteria used to determine the eligibility of 
Morocco for assistance under the Millennium Challenge Act of 2003; and
    (vii) the Government or another person or entity receiving MCC 
Funding or using assets financed in whole or in part with MCC Funding 
is found to have been convicted of a narcotics offense or to have been 
engaged in drug trafficking.
    (c) All Disbursements will cease upon expiration, suspension, or 
termination of this Compact; provided, however, MCC Funding may be 
used, in compliance with this Compact and the PIA, to pay for (i) 
reasonable expenditures for goods, works or services that are properly 
incurred under or in furtherance of the Program before expiration, 
suspension or termination of this Compact, and (ii) reasonable 
expenditures (including administrative expenses) properly incurred in 
connection with the winding up of the Program within 120 days after the 
expiration, suspension or termination of this Compact, as long as the 
request for such expenditures is submitted within ninety (90) days 
after such expiration, suspension or termination.
    (d) Subject to subsection (c) of this Section 5.1, upon the 
expiration, suspension or termination of this Compact, (i) any amounts 
of MCC Funding not disbursed by MCC will be released from any 
obligation in connection with this Compact, and (ii) any amounts of MCC 
Funding disbursed by MCC but not committed under Section 2.3 before the 
expiration, suspension or termination of this Compact, plus accrued 
interest thereon, will be returned to MCC within thirty (30) days after 
the Government receives MCC's request for such return.
    (e) MCC may reinstate any suspended or terminated MCC Funding under 
this Compact if MCC determines that the Government or other relevant 
person or entity has committed to correct each condition for which MCC 
Funding was suspended or terminated.
Section 5.2 Refunds; Violation
    (a) If any MCC Funding, any interest or earnings thereon, or any 
asset financed in whole or in part with MCC Funding is used for any 
purpose in violation of the terms of this Compact, then MCC may require 
the Government to repay to MCC in United States Dollars the value of 
the misused MCC Funding, interest, earnings, or asset, plus interest 
within thirty (30) days after the Government's receipt of MCC's request 
for repayment. The Government will not use MCC Funding, proceeds 
thereon or Program assets to make such payment.
    (b) Notwithstanding any other provision in this Compact or any 
other agreement to the contrary, MCC's right under this Section 5.2 for 
a refund will continue during the Compact Term and for a period of (i) 
five years thereafter or (ii) one year after MCC receives actual 
knowledge of such violation, whichever is later.
Section 5.3 Survival
    The Government's responsibilities under Sections 2.4, 2.6, 2.7, 
3.7, 3.8, 4.1, 5.1(c), 5.1(d), 5.2, 5.3 and 6.4 of this Compact will 
survive the expiration, suspension or termination of this Compact.

[[Page 52922]]

Article 6. Compact Annexes; Amendments; Governing Law

Section 6.1 Annexes
    Each annex to this Compact constitutes an integral part of this 
Compact.
Section 6.2 Inconsistencies
    In the event of any conflict or inconsistency between:
    (a) Any annex to this Compact and any of Articles 1 through 7, such 
Articles 1 through 7 will prevail; or
    (b) this Compact and any other agreement between the Parties 
regarding the Program, this Compact will prevail.
Section 6.3 Amendments
    The Parties may amend this Compact only by a written agreement 
signed by the Principal Representatives and subject to the completion 
of the respective domestic requirements of the Parties.
Section 6.4 Governing Law
    This Compact is an international agreement and is governed by the 
principles of international law.
Section 6.5 Additional Instruments
    Any reference to activities, obligations or rights undertaken or 
existing under or in furtherance of this Compact or similar language 
will include activities, obligations and rights undertaken by, existing 
under or in furtherance of any agreement, document or instrument 
related to this Compact and the Program.
Section 6.6 References to MCC Web site
    Any reference in this Compact, the PIA or any other agreement 
entered into in connection with this Compact, to a document or 
information available on, or notified by posting on the MCC Web site 
will be deemed a reference to such document or information as updated 
or substituted on the MCC Web site from time to time.
Section 6.7 References to Laws, Regulations, Policies and Guidelines
    Each reference in this Compact, the PIA or any other agreement 
entered into in connection with this Compact, to a law, regulation, 
policy, guideline or similar document will, unless expressly set forth 
herein or therein, be construed as a reference to such law, regulation, 
policy, guidelines or similar document as it may, from time to time, be 
amended, revised, replaced, or extended and will include any law, 
regulation, policy, guidelines or similar document issued under or 
otherwise applicable or related to such law, regulation, policy, 
guidelines or similar document.

Article 7. Entry Into Force

Section 7.1 Domestic Requirements
    Before this Compact enters into force, the Government will take all 
steps necessary to ensure that once in force (a) this Compact and the 
PIA and all of the provisions of this Compact and the PIA are valid and 
binding and are in full force and effect in Morocco, (b) this Compact 
and the PIA will be international agreements and (c) no internal law of 
Morocco may be invoked as justification for the Government's failure to 
perform any of its obligations under this Compact.
Section 7.2 Conditions Precedent to Entry into Force
    Before this Compact enters into force:
    (a) The Government and MCC will have executed the PIA, and it must 
be effective; and
    (b) the Government will have delivered to MCC:
    (i) a certificate signed and dated by the Principal Representative 
of the Government, or such other duly authorized representative of the 
Government acceptable to MCC, that the Government has satisfied the 
requirements of Section 7.1;
    (ii) a legal opinion from the Secretariat General du Gouvernement 
of Morocco (or other entity acceptable to MCC), in form and substance 
satisfactory to MCC; and
    (iii) complete, certified copies of all decrees, legislation, 
regulations or other governmental documents relating to the 
Government's domestic requirements for this Compact to enter into force 
and the satisfaction of Section 7.1, which MCC may post on its Web site 
or otherwise make publicly available.
Section 7.3 Date of Entry into Force
    This Compact will enter into force on the later of (a) the date of 
the last letter in an exchange of letters between the Principal 
Representatives confirming that each Party has completed its domestic 
requirements for entry into force of this Compact, and (b) the date 
that all conditions set forth in Section 7.2 have been satisfied.
Section 7.4 Compact Term
    This Compact will remain in force for five years after its entry 
into force, unless terminated earlier under Section 5.1 (the ``Compact 
Term'').
Section 7.5 Provisional Application
    Upon signature of this Compact, the Parties will provisionally 
apply this Compact until it has entered into force in accordance with 
Section 7.3; provided that no MCC Funding, other than Compact 
Implementation Funding, will be made available or disbursed to the 
Government before this Compact enters into force.

    In Witness Whereof, the undersigned, duly authorized by their 
respective governments, have signed this Compact this 31st day of 
August, 2007.
    Done at Tetouan, Morocco
    For Millennium Challenge Corporation, on behalf of the United 
States of America, Name: John J. Danilovich, Title: Chief Executive 
Officer.
    For the Government of the Kingdom of Morocco, Name: Fathallah 
Oualalou, Title: Minister of Finance.

Annex I Program Description

A. Overview

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

[[Page 52923]]

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

B. Fruit Tree Productivity Project

1. Background
    The Fruit Tree Productivity Project is designed to stimulate growth 
in the agricultural sector through transformation from extensive 
cropping of annuals, notably cereals, to more productive market-
oriented cultivation of perennial tree crops (olives, almonds, figs, 
dates), based on sustainable management of soil and water resources and 
improved links to national and international markets.
2. Summary of Project and Activities
    The Fruit Tree Productivity Project consists of the following 
Project Activities:
    (a) Rain-fed Olive, Almond and Fig Tree Intensification and 
Expansion.
    This Project Activity is focused on the intensification and 
rehabilitation of approximately 55,000 hectares (ha) of rain-fed fruit 
trees and the expansion of fruit tree production on approximately 
120,000 ha. The objective is to increase and stabilize farm incomes in 
target areas by facilitating the shift to tree crops. Specifically, MCC 
Funding will support:
    (i) Intensification and rehabilitation of existing olive, almond 
and fig orchards;
    (ii) expansion of tree crops by converting hillsides planted with 
annual cereal crops to new high value, terraced, perennial olive, 
almond and fig orchards;
    (iii) training and technical assistance for producers, their 
families and producer associations, focused on improved crop husbandry 
techniques; and
    (iv) capacity development for farmer cooperatives in management, 
marketing, accounting, organization and access to financial services.
    (b) Olive Tree Irrigation and Intensification.
    This Project Activity supports the intensification and 
rehabilitation of existing olive tree production in small and medium-
sized irrigated perimeters (petites et moyennes hydrauliques or, 
``PMH''). The objective is to increase the efficiency of water use and 
other crop practices to enhance the yield and profitability of olive 
production in the target areas (approximately 25,600 ha within 
perimeters covering 47,000 ha). Specifically, MCC Funding will support:
    (i) Irrigation infrastructure improvements of up to 65 PMH schemes, 
including: concrete lining of existing earthen canals; construction of 
diversion weirs, storage basins and pumping stations; works on springs; 
and repair of subsurface drainage canals;
    (ii) technical and training assistance on improved crop husbandry 
techniques for producers, their families and producer associations;
    (iii) assistance for existing agricultural water users associations 
(Associations des Usagers des Eaux Agricoles, or ``AUEA'') in 
operations, management and maintenance of irrigation water distribution 
systems; and
    (iv) the creation, training and advisory support of farmer 
cooperatives and training in management, marketing, accounting, 
organization and access to financial services.
    (c) Date Tree Irrigation and Intensification.
    This Project Activity will support the upgrading of existing small-
scale irrigation infrastructure and the intensification and 
rehabilitation of existing date tree cultivation in irrigated oasis 
perimeters (approximately 16,000 ha within perimeters covering 23,000 
ha). The objective is to increase the efficiency of water use and other 
crop practices to enhance the yield and profitability of date 
production in the target areas. Specifically, MCC Funding will support:
    (i) Irrigation infrastructure improvements of up to 12 irrigation 
schemes, including: concrete lining of existing earthen canals; 
construction of diversion weirs, storage basins and pumping stations; 
works on springs; and repair of subsurface drainage canals;
    (ii) studies and remedial works agreed to by the Parties to control 
seepage from the saddle dam portion of the Hassan Addakhil Dam on the 
Ziz River;
    (iii) rehabilitation of date trees, including the pruning, 
cleaning, and fertilizing of approximately 222,500 existing trees;
    (iv) provision and transplanting of date plants, including 
approximately 282,500 disease-free in-vitro date plants and 60,000 
selected offshoots from existing trees;
    (v) technical and training assistance for producers, their 
families, and producer associations on improved crop husbandry 
techniques and the creation, training and advisory support of farmer

[[Page 52924]]

cooperatives in management, marketing, accounting, organization and 
access to financial services;
    (vi) assistance for existing AUEAs in operations, management and 
maintenance of irrigation water distribution systems; and
    (vii) advisory support and development of business plans for date 
grading, packing and cold storage facilities at secondary cooperatives.
    (d) Fruit Tree Sector Services.
    This Project Activity will support a variety of critical value 
chain support services to ensure the success and integration of the 
Project. Specifically, MCC Funding will support:
    (i) A training needs assessment to develop a comprehensive training 
plan that will provide the basis for specific training activities;
    (ii) the establishment, and initial operations of, a national 
scientific coordinating and advisory committee to guide, oversee and 
evaluate the applied research and scientific support associated with 
the Project;
    (iii) agribusiness development to provide a market information 
system for olives and dates, a quality certification program for dates 
and olives, assistance to secondary date and olive processing-packing-
marketing cooperatives, and support for professional associations;
    (iv) market research and market planning for producer cooperatives 
and other beneficiary groups;
    (v) a gender assessment and support for two to four pilot projects 
to integrate women into small business enterprises in the fruit tree 
sector; and
    (vi) an assessment to determine whether and how Project 
beneficiaries can qualify for and benefit from carbon offset credits 
through tree planting activities.
3. Beneficiaries
    The Fruit Tree Productivity Project is expected to improve the 
livelihoods of approximately 136,000 farm households in rural areas of 
the northern, central and southern regions of Morocco. Direct 
beneficiaries of the Rain-fed Olive, Almond and Fig Tree 
Intensification and Expansion Project Activity are estimated to be 
approximately 83,000 farm households. It is estimated that 20,000 
farmers currently growing olive trees will rehabilitate and intensify 
approximately 27,500 ha of their orchards as a result of the Project 
and thus increase crop yields and quality. The Project will assist a 
second group of 16,350 farmers, who have no trees, to terrace 
approximately 43,000 ha of land and plant trees on hillsides currently 
dominated by cereal crops. Finally, Project Activities will involve 
both rehabilitation and expansion of tree crops by approximately 46,500 
farmers growing some trees on approximately 104,500 ha. Productivity 
increases resulting from the Project are expected to lead, on average, 
to an increase in agricultural net revenue of 64 percent for farmers 
that are dependent on rain-fed agriculture compared with farmers who do 
not benefit from the Project.
    For the Olive Tree Irrigation and Intensification Project Activity, 
as a result of increased supply of water and low water use crops, crop 
water deficits will be reduced and productivity will increase, leading 
to an average incremental increase in agricultural net revenue of 62 
percent for approximately 33,000 direct beneficiaries.
    For the Date Tree Irrigation and Intensification Project Activity, 
the rehabilitation of existing date palms and the provision of disease-
free in-vitro plants and selected offshoots, coupled with reduced water 
stress through increased agricultural irrigation, are expected to 
result in an incremental increase in agricultural net revenue of 52 
percent for 20,000 farmers.
    As production and crop values increase, the Project will indirectly 
benefit the network of input suppliers, transporters, processors, and 
traders along the olive, almond, fig and date value chains. In 
addition, terrace construction is expected to create benefits for 
approximately 11,000 agricultural laborers.
4. Sustainability
Institutional Sustainability
    The sustainability of the outcomes achieved by the Fruit Tree 
Productivity Project will depend upon the Ministry of Agriculture 
(``MOA''), the extension system, farmer cooperatives, AUEAs in the 
irrigated areas, and the beneficiaries. Along with research and 
training institutions, and a number of private firms, the MOA will be 
responsible for ensuring that the necessary farm advisory services to 
support beneficiaries after the Compact Term are in place. The Project 
will provide training to the MOA's central and provincial staff in new 
modes of operation and management. Technical assistance should be 
sufficient to enable farmer associations and other cooperatives to 
operate independently. The Government will ensure that AUEAs supported 
by the Project will commit to assuming responsibility for operation and 
maintenance of irrigation infrastructure financed by MCC. Technical 
support to AUEAs will strengthen their capacity to sustain maintenance 
after the Compact Term.
Financial Sustainability
    Shifting producers out of low yield cereal crops in which Morocco 
has no comparative advantage, into tree crops for which both growing 
conditions and market conditions are favorable, is an important element 
in the financial sustainability of the Fruit Tree Productivity Project. 
The sustainable use of soil and water also affects financial 
sustainability. The Project includes training and technical support to 
enhance husbandry practices, and collective marketing to maximize the 
financial opportunity afforded by this shift in cropping system.
Environmental and Social Sustainability
    The environmental and social sustainability of the Project is 
promoted by (a) improving the efficiency of irrigation water 
management, without increasing the volume of water harvested, (b) 
establishing ongoing monitoring of water and soil resources, (c) 
improving soil conservation through terracing and planting of perennial 
tree crops, in place of annual cereal crops, and (d) supporting 
integrated pest management, environmental impact assessment of olive 
oil processing, and the latest science-based farming technologies. 
Environmental and social analyses will include assessment of potential 
downstream effects of irrigation developments.
5. Environmental and Social Impacts
    The Fruit Tree Productivity Project is classified as Category A and 
will be subject to SEAs, a consultative process and any required 
follow-on assessments.
    The Government will conduct two SEAs, in form and substance 
acceptable to MCC, covering: rain-fed fruit tree intensification and 
expansion; and olive tree irrigation and intensification in PMH 
perimeters and date tree irrigation and intensification in oasis 
perimeters (including measures to address safety issues associated with 
the Hassan Addakhil Dam). Both SEAs will address issues relevant to the 
Fruit Tree Sector Services Project Activity and will include pest 
management plans (``PMP'') and HIV/AIDS awareness plans. The need for 
RAPs will be based on the recommendation of the SEAs. Based on the 
results of the SEAs, follow-on individual assessments (full EIA, 
limited assessment or site-specific EMP), as needed, will be prepared, 
acceptable to MCC, for each rain-fed perimeter, PMH perimeter, oasis 
perimeter or the Hassan Addakhil Dam improvements. The SEA will 
accelerate assessment of nursery production and terracing works for up 
to 30 selected

[[Page 52925]]

pilot rain-fed perimeters, to produce early draft EMPs for use in terms 
of reference for contracts to implement the works for these 30 
perimeters. No planting or construction work will begin until after 
completion and acceptance of the SEA by MCC and the Government. MCC 
Funding will also support an environmental unit at the MOA to address 
impact assessment, monitoring and follow-up on EIAs, EAs, EMPs and 
RAPs.
6. Donor Coordination
    In developing the Fruit Tree Productivity Project, MCC held 
numerous meetings with donors funding similar and complementary 
projects, including the World Bank, the European Union, the French 
development agency (Agence Fran[ccedil]aise de D[eacute]veloppement, or 
``AFD''), the German development agency (Kreditanstalt f[uuml]r 
Wiederaufbau, or ``KfW'') and the United States Agency for 
International Development (``USAID'').
7. USAID
    USAID currently funds a project to facilitate the switch to higher 
value crops, including linking olive oil producers to export 
opportunities. The Fruit Tree Productivity Project will scale up 
several of the USAID interventions, while building on lessons learned 
from previous projects.
8. Government Contribution
    The Government will contribute US$2,880,000 to the Fruit Tree 
Sector Services Project Activity, as more specifically set forth in the 
Program Implementation Agreement. Provincial agricultural 
administrations (Directions Provinciales de l'Agriculture) will be 
responsible for the operation and maintenance of the main works on the 
PMH and oasis irrigation systems, essentially the diversion weirs and 
large canals. The Government will also fund the cost of the remedial 
measures agreed to by the Government and MCC for the saddle dam portion 
of the Hassan Addakhil Dam on the Ziz River above the US$5,000,000 to 
be financed by MCC Funding.
    The Government will ensure that adequate financial resources are 
available to assist farmers participating in the Rain-fed Olive, Almond 
and Fig Tree Intensification and Expansion Project Activity.
9. Policy, Legal and Regulatory Reforms
    In view of the chronic scarcity of water resources in Morocco, the 
Government will continue institutional reforms and initiatives aimed at 
sustainable water resource use and will ensure compliance with existing 
laws, including the following:
    (a) Water Law 10-95, which introduced the principle of river basin 
integrated water development; and
    (b) Law (Dahir 1-69-25) on agricultural investments.
    The Government will also continue to support the water saving 
program, mainly in the irrigation sector in the Souss-Massa and Oum Er 
Rbia river basins, and the waste water treatment program in 
collaboration with the Ministry of Interior.

C. Small-Scale Fisheries Project

1. Background
    The Small-Scale Fisheries Project targets the transformation of the 
small-scale fisheries sector by modernizing the means of catching, 
landing, storing, and marketing fish, thereby improving the quality of 
the catch, maintaining the value chain, and increasing fishers' access 
to both local and export markets.
2. Summary of Project and Activities
    The Small-Scale Fisheries Project consists of the following Project 
Activities:
    (a) Fish Landing Sites and Port Facilities
    This Project Activity will construct fish landing sites (points de 
d[eacute]barquement am[eacute]nag[eacute]s, or ``PDAs'') along both 
coasts of Morocco, and construct or upgrade port facilities in 13 major 
ports, in each case for the benefit of small-scale fishers. 
Specifically, MCC Funding will support:
    (i) construction of up to 20 PDAs, including site development, 
auction hall, ice plant, fuel depot, and other essential buildings, as 
well as slipways, access roads, and utilities;
    (ii) construction of improved port facilities at up to 13 urban 
ports, including small equipment storerooms and mechanics' workshops as 
well as provision of related boat-unloading infrastructure (floating 
docks, slipways and unloading winches);
    (iii) technical and training assistance for small-scale fishers 
based at PDAs and ports on the conservation of marine resources and 
management of marine protected areas, more efficient navigation and 
fishing equipment, improved techniques to maintain hygiene and fish 
quality and safety at sea; advisory support for the creation and 
development of effective fisher's associations and cooperatives and 
training to enable fishers to access financial services; and a gender 
assessment and piloting of 4 to 8 projects to integrate women into 
small business enterprises associated with the small-scale fisheries 
sector; and
    (iv) resource sustainability efforts to strengthen and expand the 
fish stock assessment, monitoring and preservations systems at PDA 
sites, including: (1) Design and establishment of a network of 
enforceable marine protected areas to preserve the fish resource and 
environment in connection with PDA sites and in collaboration with 
local fishing communities; (2) advisory support for studying and 
designing an Integrated Coastal Zone Management (``ICZM'') program 
linked to the marine protected areas in collaboration with relevant 
Government agencies, as well as the United States National 
Oceanographic and Atmospheric Administration; and (3) design, develop, 
test and evaluate boat ice chests to preserve fish quality and lighter 
fiberglass boats to lower fuel costs and reduce the use of scarce wood 
resources.
    (b) Wholesale Fish Markets
    This Project Activity will fund the construction or rehabilitation 
of up to six modern wholesale fish markets in selected cities. 
Specifically, MCC Funding will support:
    (i) construction or rehabilitation of up to 6 wholesale fish 
markets in major cities (Marrakech, Meknes, Taza, Tetouan, Beni-Mellal, 
and Rabat); and
    (ii) technical and training assistance to the National Office for 
the Fishing Sector (Office National des P[ecirc]ches or ``ONP'') and 
private sector users in management, hygiene and sanitation.
    (c) Mobile Fish Vendors
    This Project Activity will provide fresh fish transportation 
equipment to mobile fish vendors, together with associated technical 
and training assistance. Specifically, MCC Funding will support:
    (i) up to 30 percent of the cost of approximately 2,000 modern, 
heavy duty, 3-wheeled motorbikes equipped with insulated ice chests for 
preserving fish quality and value; and
    (ii) technical and training assistance to approximately 2,000 fish 
vendors in marketing, proper hygiene, product handling, quality 
preservation, small business management, formation of associations/
cooperatives of fish vendors, and access to financial services.
3. Beneficiaries
    The Small-Scale Fisheries Project is expected to benefit 
approximately 25,000 small-scale fishers, boat owners, wholesale fish 
merchants, mobile fish vendors and their household members. The 
development of PDAs and port facilities is intended to benefit over

[[Page 52926]]

22,000 small-scale fishers. It is estimated that investments in storage 
rooms and on-site repair facilities will reduce the cost of maintenance 
and repair by approximately 18 percent. On average, net revenue for 
fishers accessing PDA facilities will increase 30 percent. The 
construction and modernization of 6 wholesale markets, mostly in the 
interior of the country, will strengthen market integration and 
facilitate an increase in the number of buyers and sellers, and result 
in increased market-clearing quantities and a more efficient market 
price. It is anticipated that these improvements to the Moroccan fish 
market will result in increased domestic consumption of fish, rather 
than its use as low value fish meal. Further, it is anticipated that 
investments to improve standards of hygiene, handling and preservation 
of fish in the cold chain will contribute to the maintenance of the 
value of fish and greater sales. Finally, a more efficient and 
transparent wholesale network will contribute to the distribution of a 
more affordable protein source to the interior of the country where a 
high level of poverty exists. Approximately 2,000 mobile fish vendors, 
earning on average US$2,250 per year, will benefit from the Small-Scale 
Fisheries Project. Mobile fish vendors will be able to increase the 
value and volume of fish sold as well as their marketing range. As a 
result, it is estimated that mobile fish vendor net incomes (once their 
loans are repaid) will increase approximately 62 percent, enabling the 
vendors to exit subsistence level poverty.
4. Sustainability
Institutional Sustainability
    The sustainability of the Small-Scale Fisheries Project depends on 
the long term viability of each major component, from first sale at the 
PDAs, major ports and the network of new wholesale markets, to mobile 
fish vendors who complete the market chain by selling to retail 
clients. Key factors for ensuring sustainability are the fish 
cooperatives at the PDA sites, ONP, and the beneficiaries themselves. 
ONP's management will be instrumental to the success and sustainability 
of the Small-Scale Fisheries Project. The PDAs and fish cooperatives 
are expected to be sustainable due to the Project timeframe, combined 
with the necessary resources for technical assistance to the fish 
cooperatives that will be established at each PDA site and eventually 
at the major ports. Each will likely require some post-project 
guidance, fee-paying and/or modest public assistance, from the normal 
ongoing services of ONP, the Department of Maritime Fisheries and its 
training and extension programs. The key to long term success and 
sustainability for the small-scale fishing enterprise is the forging of 
profitable commercial relationships with the fresh fish market through 
the auction halls at the PDAs and ports. Fishers are expected to find a 
strong incentive to participate in the system and will increasingly 
integrate into the formal sector, as long as auction halls function as 
efficient and self-supporting marketplaces, and fishers see increased 
revenues and access to benefits, such as credit, social security, and 
medical insurance. ONP will ensure that an effective public-private 
partnership is established for the management of the wholesale markets 
in the short term, supported by appropriate legal and institutional 
frameworks. The private sector is expected to take over market 
management in the medium to long term.
Financial Sustainability
    Financial sustainability of PDAs, wholesale markets and mobile fish 
vendors is supported foremost through institutional sustainability, a 
strong and growing demand for fish, and adequate resource protection. 
Of potentially greatest concern is the ability for mobile fish vendors 
to generate increased revenues to replace their equipment at market 
rates when the equipment provided by the Project wears out. The 
financing package for the vehicles is structured to provide vendors an 
increase of 20 percent in net income during the loan repayment period. 
The investment represents a major commitment in financial and business 
management terms for these micro-entrepreneurs to ensure that they are 
drawn to the new technology.
Environmental and Social Sustainability
    The Small-Scale Fisheries Project is expected to be environmentally 
sustainable because it is designed to increase the value of the fish 
caught as opposed to increasing the quantity. In addition, the Project 
will establish and strengthen a fish stock assessment and monitoring 
system at the PDA sites, develop a network of enforceable marine 
protected areas in collaboration with local fishing communities, and 
provide advisory support for the development of an ICZM program linked 
to the marine protected areas.
5. Environmental and Social Issues
    The Small-Scale Fisheries Project is classified as Category A 
according to MCC Environmental Guidelines. The Government will conduct 
required EIAs and RAPs (each including site-specific EMPs and an HIV/
AIDS awareness plan), in form and substance acceptable to MCC, 
corresponding to agreed upon construction packages, each of which 
includes PDAs, port improvements and wholesale markets. Consistent with 
OP 4.12, the RAPs will address issues related to physical or economic 
displacement and land takings related to the Project. MCC Funding will 
support an environmental unit at ONP to address impact assessment, 
monitoring and follow-up on EIAs, EMPs and RAPs. The Government will 
fund all resettlement compensation in accordance with RAPs approved by 
MCC and consistent with OP 4.12.
6. Donor Coordination
    The Japanese government and the World Bank have provided ongoing 
technical and monetary support to the Government since 1988. The 
Japanese have supported extension services to small-scale fishers and 
construction of fishing villages similar to the ones proposed for MCC 
financing. There have been at least two previous donor projects to fund 
mobile fish vendors.
7. Government Contribution
    The Government will contribute or cause to be contributed: 
US$7,880,000 for the Fish Landing Sights and Port Facilities Project 
Activity, which includes any incurred resettlement costs and in-kind 
contributions for design and evaluation of boat ice chests and 
fiberglass boats; US$4,470,000 for the Wholesale Fish Markets Project 
Activity related to wholesale market construction; and US$10,420,000 
for Project management. The Government will fund all resettlement 
compensation in accordance with RAPs approved by MCC and consistent 
with OP 4.12.
8. Policy, Legal and Regulatory Reforms
    In order to reach the full benefits of the Small-Scale Fisheries 
Project, the Government will:
    (a) Ensure that a law regulating wholesale fish marketing by 
``mareyeurs'' (wholesale fish buyers/sellers) is enacted and 
regulations are issued pursuant thereto no later than July 31, 2009; 
and
    (b) Adopt and issue documentation for official registration 
(autorisation d'exercice) of mobile fish vendors, together with 
training and operating practices of eligibility and compliance and 
ensure that only vendors who have qualified for and received 
registration will become beneficiaries of the Project.

[[Page 52927]]

D. Artisan and Fez Medina Project

1. Background
    The Artisan and Fez Medina Project will stimulate economic growth 
by (a) increasing value to the tourism and artisan sector through 
leveraging the links between the craft sector and tourism and (b) 
increasing the value of the cultural, historic and architectural 
resources of the Fez Medina. Technical training for traditional 
artisans will enable them to modernize their production techniques and 
capitalize on the growing tourist industry and export market. The 
Project will also strengthen the national system for literacy and 
vocational education to the benefit of artisans and the general 
population, in particular women and girls. To improve artisans' ability 
to invest in improved capital such as modern kilns and workshops, the 
Project will facilitate their access to financial services from local 
banks or microcredit associations. The Artisan and Fez Medina Project 
will also support the design and renovation or reconstruction of 
several prominent and historically significant sites within the Fez 
Medina with the goal of stimulating economic growth in the Medina.
2. Summary of Project and Activities
    The Artisan and Fez Medina Project consists of the following 
Project Activities:
    (a) Literacy and Vocational Training
    This Project Activity will increase the capacities of the national 
training system including those managed by the National Office for 
Professional Training and Work Promotion (L'Office de la Formation 
Professionnelle et de la Promotion du Travail, or ``OFPPT'') and others 
to offer training for instructors, develop new skill-based career 
programs, purchase instructional resources and equipment, support 
mobile training units, upgrade artisan training centers, develop a 
teacher professional development program and a new instructional 
development production center. This Project Activity will also support 
remedial education and literacy training. The Parties will conduct an 
economic analysis to estimate the economic returns for (i) existing 
OFPPT programs and other vocational education programs, and (ii) 
remedial education and literacy programs. Based on the results of this 
analysis, a work plan will be developed jointly by MCC and the 
Government that specifies funding levels for the Project Activity for 
the first two years of the Compact Term and a performance monitoring 
plan. A review of the Project Activity will be conducted at the end of 
the second year of the Compact Term. MCC Funding for subsequent years 
and any reallocations of MCC Funding among education programs will be 
subject to MCC approval.
    (b) Artisan Production.
    This Project Activity will assist the potters of Fez and Marrakech 
to meet growing demand for high quality Moroccan pottery by investing 
in modern techniques and equipment, including cleaner burning kilns to 
replace traditional, high polluting, wood burning kilns. Specifically, 
MCC Funding will support:
    (i) a technology transfer package that will include demonstrations 
of modern kilns and training in modern production techniques, design, 
marketing and business management;
    (ii) financial assistance for approximately 20 percent of the kiln 
costs on a reimbursable grant basis; and
    (iii) technical assistance for potters to facilitate access to 
financial services from local banks and microcredit associations.
    This Project Activity will be implemented in coordination with an 
environmental fund financed with German assistance (Fonds de 
D[eacute]pollution Industrielle, or ``FODEP''), and possibly other 
partners, to provide up to US$2,500,000 in financing to subsidize an 
additional 40 percent of the cost of modern kilns.
    Participation in the Project Activity by artisans is voluntary. The 
Government will not use MCC Funding or any other resources to offer 
additional subsidies or change the terms of the Project Activity in any 
manner to increase participation if voluntary participation is lower 
than expected.
    (c) Fez Medina.
    The Fez Medina Project Activity includes the rehabilitation or 
construction of five sites along the Fez Medina tourist routes. 
Specifically, MCC Funding will support the following:
    (i) the design of the Makina, reconstruction of portions of the 
Makina, and the design and reconstruction of Place Lalla Ydouna 
(``PLY'') and three 14th and 15 century fondouks (large, multi-story 
structures surrounding a central courtyard);
    (ii) a design competition to create effectively designed spaces at 
the Makina and PLY that will better serve local residents and attract 
visitors to Fez;
    (iii) the development of a production zone at Ain Nokbi for the 
resettlement of copperware workers affected by the rehabilitation of 
PLY; and
    (iv) a study to identify and evaluate options for the traditional 
tanneries that are consistent with reducing poverty and stimulating 
economic growth and that meet relevant national and international 
environmental, health and safety standards.
    (d) Artisan Promotion.
    MCC Funding will support marketing campaigns to highlight artisans 
and their crafts within the Medinas of Fez and Marrakech, including the 
creation and updating of tourist circuits. The marketing campaign will 
include the promotion of a craft label to clearly distinguish genuine 
Moroccan crafts from foreign imitations.
    MCC Funding will also support a pilot international campaign to 
promote Moroccan artisan exports. The economic returns from this 
subactivity will be evaluated after the end of the second year of the 
Compact Term to determine whether continued MCC Funding is justified.
3. Beneficiaries
    The Literacy and Vocational Training Project Activity is expected 
to benefit 1,000 faculty and students (reaching approximately 120,000 
by the end of the Compact Term) in up to 100 targeted schools. It is 
expected that 50,000 master artisans will be trained in new design and 
production methods by the end of the Compact Term. Thirty new career 
tracks will be created and installed in OFPPT schools that will 
diversify, expand and deepen competencies of students for better 
employment and incomes. New policy measures and institutional 
capabilities will encourage matriculation among non-literate citizens 
of Morocco. Innovative mobile training programs are expected to reach 
at least 15,000 people during the Compact Term.
    The Artisan Production Project Activity is expected to assist 
approximately 3,250 artisan workers and 550 master artisans based on 
projected participation in the training and purchase of modern kilns.
    The Fez Medina and Artisan Promotion Project Activities are 
expected to reduce poverty by stimulating the Medina's main industries, 
tourism and artisan production, and are estimated to directly benefit 
approximately 20,000 low income workers in the Fez Medina.
4. Sustainability
Institutional Sustainability
    The Literacy and Vocational Training Project Activity will include 
reforms in the management of the apprenticeship training program for 
artisans, including changes in the management of training centers, and 
launching of pilot programs to develop demand driven training.

[[Page 52928]]

    The implementation of the technology transfer package for kilns 
will require capacity building within the Ministry of Tourism, 
Artisanat and Social Economy, which should enable it to successfully 
sustain these activities and to launch similar programs in the future. 
Specifically, the Ministry's regional delegations in Fez and Marrakech, 
who will play a critical role in managing the Artisan Production and 
Promotion Project Activities and currently do not have sufficient 
staff, will receive training in relevant areas, including project 
management, procurement, logistics, and communication.
    The Fez Medina Project Activity will include institutional capacity 
building for the Agency for the De-densification and Rehabilitation of 
the Fez Medina (Agence pour la Dedensification et la Rehabilitation de 
la Medina de F[egrave]s, or ``ADER''). ADER staff will receive training 
in relevant areas, including project management, procurement, 
logistics, and communication.
Financial Sustainability
    The Artisan Production Project Activity will include a 
demonstration program providing potters with the opportunity to 
practice producing their own products using modern kilns--as well as 
practice producing new products for new markets (e.g., high end tourist 
shops) that take advantage of the expanded capabilities of modern 
kilns--before committing to the transition. In addition, the cost 
sharing component of this program should help ensure beneficiary buy-in 
by including only potters willing to contribute a significant portion 
of the kiln cost, using their own or borrowed funds. These 
demonstrations and cost sharing, combined with the significant training 
in production, marketing and design, should lead to potters generating 
enough profit to pay for the higher cost of operating modern kilns. In 
addition, reimbursement from the potters of MCC Funding for the 
purchase of modern kilns will be paid into an account that will 
potentially be dedicated to the funding of an education program for 
child laborers in the Moroccan pottery industry, or other uses mutually 
agreed to by the Government and MCC.
    Operation and maintenance of the newly renovated buildings in the 
Fez Medina will be ensured through the involvement of the private 
sector in the development and management of each site. The design 
competition will ensure that the designs will be demand driven. Profits 
generated from the transfer of management or use rights to the private 
sector will be paid into an account that will potentially be dedicated 
to the funding of public projects in the Medina. An agreement governing 
the use and management of the funds will be reached between MCC and the 
Government before the end of the fourth year of the Compact Term.
    The Government envisions continuing support for the Artisan 
Promotion Project Activity after the Compact Term through financing 
from artisans and artisan cooperatives, traders and retailers, private 
enterprises, and public funds from national, regional and city 
administrations. The firm chosen to implement the Project Activity will 
evaluate private organizations with the goal of selecting one to take 
over the management of the craft label and other promotion activities 
before the end of the Compact Term.
Environmental and Social Sustainability
    Environmental and social sustainability of the Artisan and Fez 
Medina Project will be promoted through the Project's contribution to 
the rehabilitation, preservation and enhancement of the cultural and 
historic value of the Fez Medina consistent with UNESCO objectives, 
support for artisans to transition to modern kilns from highly 
polluting and unsafe traditional kilns, and the promotion of better 
waste management practices in the Medina. The Government will undertake 
steps to clean up the river and areas adjacent to PLY, and MCC Funding 
will support a public awareness campaign for better waste management in 
the Medina and a study to identify alternatives to address highly 
polluting and hazardous conditions at traditional tanneries in the Fez 
Medina.
5. Environmental and Social Issues
    The Artisan and Fez Medina Project is classified as Category A, 
because many of the Project Activities (exclusive of the training and 
promotion activities) are located in or near the Fez Medina--a cultural 
and historic heritage site of great significance and sensitivity, and 
the first Moroccan site to be designated as a UNESCO World Heritage 
Site. All activities in the Fez Medina and the Artisan Production 
Activities will require full impact assessment, including a 
consultative process, and will comply with Moroccan laws concerning 
water quality, air quality, waste management and disposal, and the 
preservation of historic buildings and sites. The EIAs will incorporate 
a consultative process; will be conducted in conjunction with the 
feasibility and design efforts and will address all direct, indirect, 
and cumulative impacts; and will require EMPs to be developed and 
implemented.
    There will be two EIAs for the Artisan and Fez Medina Project. The 
Fez Medina Project Activity involves involuntary resettlement and 
requires a RAP consistent with OP 4.12. The Government will conduct the 
first EIA, including an EMP, and the RAP. The first EIA will cover the 
Artisan Production Project Activity, the Makina, the fondouks, PLY, and 
Ain Nokbi, which serves as a resettlement site for copperware workers. 
The first EIA will analyze the proposed kilns to be purchased as part 
of the Artisan Production Project Activity to ensure they can be 
installed and used safely and meet air pollution standards acceptable 
to MCC. Kiln acquisitions will only be supported in locations where 
they can be installed and operated safely in a manner consistent with 
Moroccan laws and regulations. This EIA will also include a review of 
child labor issues and recommend remedies for any abusive practices. 
Repayments of the kiln grants may be used to fund a program to address 
child labor in the Moroccan pottery industry. With respect to the 
Makina and the PLY, the first EIA will provide only the baseline 
inventory, an analysis of environmental constraints/opportunities, 
identification of infrastructure gaps that would affect design 
competition options and baseline data on households and businesses. 
Once the design competition of the Makina and PLY is completed, the 
selected firm(s) will conduct the second EIA of the winning designs 
using MCC Funding and will develop an EMP to be implemented by 
appropriate stakeholders. The aspects of the two EIAs and EMPs related 
to the Fez Medina Project Activity will involve the Ministry of Culture 
and UNESCO, and provide specific requirements for managing restoration, 
rehabilitation and reconstruction, and chance finds in accordance with 
the MCC Environmental Guidelines and applicable Moroccan laws and 
regulations. MCC Funding will also fund environmental units for the 
Ministry of Artisanat and ADER to support environmental impact 
assessment, monitoring and follow-up on EMPs and RAPs.
6. Donor Coordination
    In developing the Artisan and Fez Medina Project, MCC has held 
numerous discussions with donors to understand previous and ongoing 
projects in the sector, both in Morocco and internationally. MCC 
support for acquisition of kilns for potters builds

[[Page 52929]]

significantly upon those experiences. The Artisan Production Project 
Activity will be implemented in coordination with FODEP, and possibly 
other partners to provide up to US$2,500,000 in additional financing 
for modern kilns. UNESCO will be involved in the design competition and 
other aspects of the Fez Medina Activity. Cluster-skills models being 
supported by Spain in other countries will be imported to Morocco with 
Spanish financial support. The International Labor Organization will 
lend skills certification resources to support the creation of new 
programs. The Literacy and Vocational Training Project Activity will be 
coordinated with the European Union's MEDA II project, which is 
currently strengthening OFPPT capacities in a number of career fields.
7. Government Contribution
    The Government will cause to be contributed US$40,000,000 plus an 
estimated 10 percent contingency, for the renovation and reconstruction 
of the Makina, as well as ensure that all additional funding necessary 
for completion of the Makina is made available through additional 
contributions, private sector, or other donor financing. The Government 
will also provide the necessary funding for environmental remediation 
on the river Oued Boukhrareb, the renovation of the riverbanks near PLY 
and the acquisition and unification of property at PLY and the 
fondouks. In addition, the Government will fund an initial census of 
occupants at PLY and urgent preliminary works at the Makina and the 
fondouks, the scope of which will be subject to MCC approval.
    For all sites within the Fez Medina Project Activity, the 
Government will ensure that the property is acquired and held in a 
single public entity to be approved by MCC. Unification of ownership of 
all sites will be a condition to Disbursements as more specifically set 
forth in the Project Implementation Agreement.
    The Government will make the Ain Nokbi site available for 
resettlement of copperware workers physically and economically 
displaced as a result of the Fez Medina Project Activity.
8. Policy, Legal and Regulatory Reforms
    The Government will ensure that Regie Autonome d'Eau et 
d'Electricito de F[egrave]s will make a commitment by the end of 2007 
that wastewater will not be transmitted via the river Oued Boukhrareb.

E. Financial Services Project

1. Background
    The Financial Services Project is expected to increase financial 
services for micro-enterprises in Morocco by addressing the key 
constraints to the development of a broader, deeper, market-based 
financial sector.
2. Summary of Project and Activities
    The Financial Services Project consists of the following Project 
Activities:
    (a) Access to Funds for Microfinance.
    MCC Funding will support an investment in Jaida S.A, a non-bank 
financial institution launched in late 2006 to provide debt funding to 
the Moroccan microcredit sector. Jaida is designed to be a market 
solution to a potential financing gap, and it will offer products 
tailored according to the risk of each microcredit association. MCC 
Funding to support Jaida will be provided to the maximum extent 
possible on market terms, so that such lending does not crowd out or 
impede market-based lending by commercial banks to microcredit 
associations or result in subsidized lending to these associations. 
Subject to MCC approval, it is anticipated that the investment in Jaida 
will be in the form of subordinated debt.
    Prior to the end of the fourth year of the Compact Term, MCA-
Morocco will develop a plan, acceptable to MCC, for the disposition of 
all proceeds and assets remaining at the end of the Compact Term. The 
Parties expect that neither MCC Funding nor the proceeds of loans 
repaid by Jaida will be used to make new loans to Jaida after the end 
of the Compact Term.
    (b) New Financial Product Development.
    Several microcredit associations in Morocco have begun to explore 
the possibility of changing their legal structure in order to mobilize 
equity from shareholders, as well as to accept savings deposits and 
offer other non-credit financial services (i.e., to undergo 
``transformation'').
    MCC Funding will support the analysis of the regulatory and 
operational requirements for transformation. Other issues related to 
extending a broader set of financial services to clients, including the 
possibility for partnerships between the microcredit and banking 
sectors, will also be analyzed. An important output will be a detailed 
action plan, acceptable to the Government and MCC, including the 
appropriate legal structure for transformation, next steps for the 
sector, and timeline for completing any necessary changes. The 
associations and their network will be consulted throughout the 
development and validation of the action plan. MCC Funding will also 
support technical assistance to financial institutions to help 
implement the recommendations from the action plan.
    (c) Improvement of Operating Efficiency and Transparency.
    MCC Funding will help financial institutions improve their 
operating efficiency and build transparency through support for:
    (i) sustainable technologies proposed by institutions, with 
preference given to innovative and experimental approaches;
    (ii) preparation for microcredit associations' compliance with 
Central Bank requirements for data to be submitted to the credit 
bureau;
    (iii) mobile branches to encourage microcredit associations to test 
new approaches for expanding their geographic reach;
    (iv) building financial institutions' understanding of the priority 
sectors to highlight the potential of these sectors and provide 
information on which to base investment decisions, and
    (v) partial financing of institutional ratings for microcredit 
associations.
3. Beneficiaries
    The key beneficiaries of the Financial Services Project will be 
clients (small borrowers such as individuals or micro-enterprises) of 
microcredit associations operating in Morocco. The intended impact of 
the Project is to increase the supply of financial services for these 
clients. Furthermore, to the extent that the Project causes investments 
that lead to service upgrades and helps microcredit associations 
improve efficiency, clients should benefit from better services, and 
either some additional increase in lending or reduction in borrowing 
costs. Today, the microcredit sector serves approximately 1.2 million 
clients. Assuming the Project facilitates a net increase in the client 
growth rate of a quarter of one percent per year, and assuming that 
without the Project the client growth rate is 30 percent per year, then 
there would be 43,000 additional clients by the end of the Compact 
Term. If the net increase in growth is one percent per year, there 
would be 174,000 additional clients by the end of the Compact Term.
4. Sustainability
Institutional Sustainability
    MCC funding will support technical assistance for selected 
microcredit associations to implement the legal,

[[Page 52930]]

management and operational requirements necessary for sustainable 
transformation. The Project will also help associations evaluate the 
various options available, including options regarding how to grow in a 
sustainable manner within the new regulatory environment without 
transforming. Support to prepare associations for the introduction of a 
universal credit bureau, as well as to use technologies to reduce costs 
while expanding breadth of outreach, are also expected to contribute to 
the sustainability of the sector.
Financial Sustainability
    The Financial Services Project seeks to make microcredit 
associations more efficient and reduce transaction costs in order to 
lower operating costs and further improve their financial 
sustainability. Furthermore, access to credit and other financial 
services is expected to enable the clients of these institutions to 
make profitable investments and improve the financial sustainability of 
their own enterprises.
Environmental and Social Sustainability
    Environmental and social sustainability of the Financial Services 
Project will be promoted through: application of lending guidelines and 
procedures to ensure compliance with the MCC Environmental Guidelines, 
MCC Gender Policy and OP 4.12; requiring adequate institutional 
capacity for Jaida to implement these guidelines and procedures; and by 
providing training for the associations in environmental and social 
screening.
5. Environmental and Social Issues
    The Financial Services project is classified as Category D 
according to MCC Environmental Guidelines. Prior to the first 
Disbursement to Jaida, Jaida will be required to supplement or revise, 
in a manner acceptable in form and substance to MCC, the lending 
guidelines and procedures required for associations to which it lends 
to ensure that they meet MCC Environmental Guidelines, MCC Gender 
Policy, and OP 4.12. Jaida will demonstrate commitment and adequate 
resources to implementing the procedure and will take action to remedy 
any gaps in implementation on an ongoing basis. MCC and MCA-Morocco 
will be provided with an annual reporting summarizing the social and 
environmental performance of associations to which Jaida lends. The 
Financial Services Project will incorporate training for associations 
in environmental and social screening and/or guidelines and include 
outreach to women.
6. Donor Coordination
    The Financial Services Project builds on and complements the 
strategic priorities that have been articulated by other donors and 
industry professionals. MCC has held numerous meetings with donors 
either currently or previously active in the financial sector in 
Morocco, including, but not limited to, USAID, KfW, AFD, Consultative 
Group to Assist the Poor (``CGAP''), the World Bank, and the 
International Finance Corporation. MCC will join a number of other 
donors in supporting Jaida (KfW and AFD are both shareholders); the 
support to innovations in technology will build on a similar global 
program implemented by CGAP with funding from the Gates Foundation; and 
the support to institutional ratings will build on a recent global 
initiative of the IDB, European Union and CGAP. Continued coordination 
will be a priority throughout implementation, and especially during the 
development of the action plan for transformation.
7. Policy, Legal and Regulatory Reforms
    The Government will take the necessary actions to allow those 
microcredit associations that are ready and willing to do so to undergo 
institutional transformation, following the results of a study 
analyzing the relevant legal and operational requirements. This study 
will build on global best practices as well as previous analyses done 
in Morocco, and will result in a detailed action plan to be reviewed by 
all relevant stakeholders and agreed to by the Government and MCC. The 
action plan is expected to be completed and agreed to by no later than 
the end of 2008, and the Government will take the necessary relevant 
actions by no later than the end of 2009.

F. Enterprise Support Project

1. Background
    The Enterprise Support Project will measure and improve the 
outcomes of two existing high priority Government initiatives, 
Moukawalati and INDH. The Enterprise Support Project is structured in 
two phases: First, a set of three pilots will measure the impact of 
several training initiatives offered to current beneficiaries of these 
Government programs who would receive further training and technical 
assistance designed to increase their rate of survival. Second, if 
results reported by an independently conducted evaluation are 
promising, training initiatives will be expanded beginning in the third 
year of the Compact Term. In addition, the Government agency sponsors 
of the programs would receive support to help them better manage the 
selection and training processes for these entrepreneurs.
2. Summary of Project and Activities
    The Enterprise Support Project consists of the following Project 
Activities:
    (a) Moukawalati and INDH.
    Moukawalati is a program to create a more entrepreneurial culture 
and to address high unemployment rates for Morocco's youth, 
particularly among new graduates. Under the Moukawalati program, 
Government funds will be used to help entrepreneurs develop business 
plans and to get bank funding. MCC Funding will support additional 
business skills training to an enterprise, but only after the 
entrepreneur has satisfied all other registration requirements and has 
been approved for a bank loan. Two pilot programs will be run, one by 
OFPPT, and one by the National Agency for the Promotion of Small and 
Medium Enterprises (Agence Nationale pour la Promotion de la Petite et 
Moyenne Entreprise, or ``ANPME''). A third pilot will test whether the 
training provided to INDH beneficiaries (typically cooperatives and 
other forms of income generating associations) helps them to increase 
sales and be more sustainable. The educational background of target 
groups under each of the pilots is different and the form of the 
training provided, e.g., group vs. individual training, will also vary 
from pilot to pilot. The amount of MCC Funding for these Project 
Activities will be allocated in accordance with the Government entity 
implementing each Project Activity as set forth in the Multi-Year 
Financial Plan Summary as set forth in Annex II.
(b) Training Scale-Up
    During the pilot phases, independent evaluations will be conducted 
to compare firms who receive technical support and those that do not 
and assess variations in key indicators of firms' health--survival 
rates and revenues. At the end of the pilot, the Parties will consult 
to determine whether the results merit a scaling-up of the training 
activity to include up to 6,000 enterprises and associations over the 
remaining Compact Term.
3. Beneficiaries
    During the pilot project phases, approximately 600 enterprises will 
receive training. Four hundred will be new enterprises initiated under 
Moukawalati (200 each managed by ANPME and OFPPT) and 200 revenue 
generating groups initiated under INDH.

[[Page 52931]]

Subsequent to the pilot period, it is assumed that up to 4,000 
enterprises created under Moukawalati will receive technical assistance 
and up to 2,000 INDH groups will receive similar support. SMEs created 
under Moukawalati will typically have fewer than five employees. Groups 
receiving Government grants under the INDH program will typically 
consist of about 20 participants. INDH beneficiaries will be drawn 
either from 250 target neighborhoods in 25 cities or one of 348 
communes where the rates of poverty are in excess of 30 percent.
4. Sustainability
Institutional Sustainability
    The ultimate beneficiaries are the enterprises that survive and 
continue to create jobs and income in numbers exceeding their expected 
survival rate. For example, the expected business survival rate in 
Morocco after two years is approximately 70 percent; a rate of survival 
in excess of that would begin to repay the Government of Morocco's 
investments in Moukawalati and INDH. In addition, OFPPT, which will 
offer entrepreneurship-supporting courses and training for the first 
time, will be assisted through its own start-up phase for these 
activities. ANPME, OFPPT and INDH will each receive assistance, 
respectively, to strengthen their abilities to deliver training 
content. Finally, consultants and consulting firms that provide the 
hands-on training to the SMEs and associations will be given a chance 
to demonstrate their abilities to contribute to enterprise growth and 
sustainability.
Financial Sustainability
    The activities proposed to strengthen new enterprises created with 
the help of government programs reduce Government losses from loan 
guarantee schemes, increase tax revenues, and provide other actionable 
feedback to the Government regarding the effectiveness of its programs. 
The programs will be scaled up if it can be demonstrated that the 
benefits of the programs more than offset the costs of delivering them.
5. Environmental and Social Issues
    The Enterprise Support Project is classified as Category C, 
according to MCC Environmental Guidelines as Project Activities are 
unlikely to have any direct or indirect impacts on the environment. As 
the proposed interventions entail monitoring and evaluation of training 
and development of pilots, the Project will incorporate proactive 
measures, as appropriate, regarding environmental sustainability for 
SME clients. All pilot activities will be re-evaluated during the 
Compact Term to determine whether this classification should be changed 
and subject to environmental assessments and/or RAPs.
6. Donor Coordination
    In developing the Enterprise Support Project, MCC has met with the 
World Bank, AFD and other supporters of the INDH program. UNIDO and 
Agencia Espa[ntilde]ola de Cooperacion Internacional have supported 
women entrepreneurs engaged in the agro-industry. The European Union 
and GTZ have sponsored several enterprise support programs directed at 
SMEs on which part of the proposed Project is modeled.
7. USAID
    USAID has sponsored a number of interventions directed at artisans 
and other small businesses that are looking to take advantage of the 
United States-Morocco Free Trade Agreement. Lessons have been drawn 
from their work, and MCC will share its own experience during the pilot 
activity with other donors engaged in the sector.

G. Implementation Framework

1. Overview
    Unless otherwise agreed to by the Parties in writing, the 
implementation framework and the plan for ensuring adequate governance, 
oversight, management, monitoring and evaluation and fiscal 
accountability for the use of MCC Funding is summarized below. MCC and 
the Government will enter into the PIA, and any other agreements in 
connection with this Compact, which will further set forth the rights 
and responsibilities of the Parties relating to the implementation of 
the Program.
2. MCC
    MCC will take all appropriate actions to carry out its 
responsibilities in connection with this Compact and the PIA, including 
the exercise of its approval rights in connection with the 
implementation of the Program.
3. Government and MCA-Morocco
    The Government, through passage of a law, will create an 
independent agency (an ``[eacute]tablissement public'') (``MCA-
Morocco''), which will be authorized to act on behalf of the Government 
in order to manage and oversee the implementation of this Compact and 
the Program. MCA-Morocco will have full decision-making autonomy, 
including, inter alia, the ability, without consultation with, or the 
consent or approval of, any other party, to (a) enter into contracts in 
its own name, (b) sue and be sued, (c) establish an account in a 
financial institution in the name of MCA-Morocco and hold MCC Funding 
in that account, (d) expend MCC Funding, (e) engage the Ministry of 
Finance as a fiscal agent on terms acceptable to MCC, (f) engage one or 
more procurement agents who will act on behalf of MCA-Morocco to manage 
the acquisition of the goods, works and services requested by MCA-
Morocco to implement the activities funded by this Compact, and (g) 
competitively engage one or more auditors to conduct audits of its 
accounts. The governance of MCA-Morocco will be set forth in more 
detail in the PIA, the constitutive documents and internal regulations 
of MCA-Morocco (``Internal Regulations'') or as otherwise agreed in 
writing by the Parties. The Internal Regulations will be in accordance 
with MCC's Guidelines for Accountable Entities and Implementation 
Structures, published on the MCC Web site (the ``Governance 
Guidelines'').
    MCA-Morocco will be headquartered in Rabat.
    MCA-Morocco will be composed of (a) a strategic steering committee 
(the ``Strategic Steering Committee'' or ``SSC'') and (b) a management 
unit (the ``Management Unit''). MCA-Morocco will also establish and 
consult regularly with one or more stakeholders' committees, and MCA-
Morocco will use various Government entities to help implement specific 
Projects.
    (a) Strategic Steering Committee.
    (i) Composition. Unless otherwise agreed by the Parties, the 
Strategic Steering Committee will be chaired by the Prime Minister (or 
its designee) and be comprised of nine voting members, including (1) 
the chair; (2) one representative from each of the Ministries of: 
Finance; Agriculture; Interior; Land Planning, Water and Environment; 
and Artisanat; (3) one representative from the business sector 
(Confederation Geneerale des Enterprises Marocaines (CGEM)); and (4) 
two representatives from civil society. One of the two civil society 
representatives will represent microcredit associations, and the other 
will be nominated by a women's group. The Director General of MCA-
Morocco and the MCC representative in Morocco, among others, will be 
non-voting members. No remuneration will be paid to any Government 
representative on the Strategic Steering Committee.
    (ii) Roles and Responsibilities. The Strategic Steering Committee 
will be responsible for overseeing the implementation of the Program, 
including making major decisions, such as approving annual 
implementation

[[Page 52932]]

plans, disbursement requests, annual progress reports and key contracts 
and reporting on policy reforms, as well as other responsibilities 
defined in the Internal Regulations. The SSC will meet regularly. The 
frequency of SSC meetings will be set forth in the Internal Regulations 
and will be in accordance with the Governance Guidelines. The specific 
roles of the voting and non-voting members will be set out in the 
Internal Regulations.
    (b) Management Unit.
    (i) Composition. The Management Unit, led by a competitively 
selected Director General, will also be composed of competitively 
selected directors with expertise in the key components of the program 
(agriculture, fisheries, artisan, financial services and enterprise 
support) and key employees, including a chief financial officer, legal 
counsel and directors of environmental and social impact, procurement 
and monitoring and evaluation.
    (ii) Location. The Management Unit will be based in Rabat.
    (iii) Roles and Responsibilities. The Management Unit will be 
responsible for managing the day-to-day implementation of the Program 
with oversight from the SSC.
4. Stakeholders' Committees
    (a) Composition.
    To ensure the continuation of the consultative process throughout 
Compact implementation, the Government will, consistent with the 
Governance Guidelines, establish, or will make use of pre-established 
groups to serve as stakeholders' committees, the size and composition 
of which will be designed to maximize participation at the Program, 
Project and Project Activity levels and include key NGOs, the private 
sector, civil society, and local and regional governments.
(b) Location
    The stakeholders' committees will convene where appropriate to 
ensure maximum participation in providing feedback on Program and 
Project implementation.
(c) Roles and Responsibilities.
    The Strategic Steering Committee will consult with the 
stakeholders' committees on a regular basis or at the request of a 
stakeholders' committee as set forth in the Internal Regulations. The 
stakeholders' committees will receive and review certain reports, 
agreements and documents, including implementation documents, and will 
provide advice and feedback regarding Program implementation.
5. Fez Medina Project Activity Advisory Committee
    MCA-Morocco will establish an advisory committee (the 
``Committee'') to coordinate the activities of other agencies and 
stakeholders in connection with implementation of the Fez Medina 
Project Activity, and to advise and assist ADER as implementing entity 
for the Fez Medina Project Activity.
    (a) Composition.
    The Committee will be chaired by the Wali of Fez and will include 
the Mayor of Fez (or designee), the Secretaries General of Artisanat 
and Tourism (or designees), and representatives of the Ministry of 
Culture, the Agence Urbaine, UNESCO, the Medina's neighborhood 
associations, Fez's artisan associations, key NGOs, experts in historic 
preservation, and the private sector. The final size and composition of 
the Committee will be agreed upon between MCC and MCA-Morocco.
    (b) Frequency and Location of Meetings.
    The Committee will convene as frequently as necessary, but at least 
quarterly, to provide ADER with feedback and support related to 
implementation of the Fez Medina Project Activity. Meetings will be 
held in Fez or in other locations as required to achieve the purpose of 
the meeting.
    (c) Roles and Responsibilities.
    ADER will provide the Committee with short status reports in 
advance of each meeting summarizing the status of ongoing activities, 
and key issues and constraints affecting implementation of the Project 
Activity. The Committee will provide ADER with support to enable it to 
effectively implement the Project Activity, including guidance and 
advice on key elements of the Project Activity, such as decisions 
affecting the proposed uses of the sites, the mechanisms for soliciting 
private participation and investment in renovations, the guidelines for 
the design competition, resettlement and expropriation matters, 
environmental cleanup measures, public outreach programs, the effect of 
the Project Activity on women and underrepresented or vulnerable 
groups, and the makeup of the jury of the design competition. The 
Committee will be responsible for assisting ADER in obtaining the 
cooperation of other agencies and groups in order to ensure smooth and 
timely implementation of the Project Activity. The Committee will 
ensure mechanisms for residents of the Fez Medina, civil society, 
artisan groups, and the private sector to provide input into the Fez 
Medina Project Activity.
6. Implementing Entities
    (a) Composition.
    The Government and MCC will identify the principal ministries and 
public institutions that will serve as implementing entities (each, an 
``Implementing Entity''). They include, but are not limited to, the 
Ministries of Agriculture and Artisanat, as well as ONP and ADER. MCA-
Morocco will enter into agreements with the Implementing Entities that 
set forth their roles and responsibilities in connection with Program 
implementation.
    (b) Location.
    Implementation of the Fruit Tree Productivity, Small-Scale 
Fisheries, and Artisan and Fez Medina Projects will require, and other 
Projects may require, the services of dedicated implementation teams 
within the Implementing Entities. Additional personnel to be based 
within the Implementing Entities may be contracted by MCA-Morocco where 
appropriate.
    (c) Roles and Responsibility.
    The Implementing Entities will be responsible for coordination of 
the activities of various contractors, achievement of Project 
Objectives and timelines; development of Compact-related requirements 
(work plans, detailed financial plans, and quarterly reports), 
procurement (where MCC has determined that procurement tasks may be 
performed by the Implementing Entity) and performance monitoring of 
contractors.
7. Fiscal Agent
    The Ministry of Finance will serve as the fiscal agent for the 
Program, assisted by a ``fiscal coordination unit'' within the Ministry 
of Finance, charged with all financial issues, including regular 
reporting to MCA-Morocco on global and activity-specific budget 
concerns, and the maintenance and security of the financial information 
management system. Reporting will be coordinated by the chief financial 
officer and procurement officer within MCA-Morocco.
8. Procurement Agent
    Unless otherwise agreed to by the Parties, MCA-Morocco will engage 
up to five procurement agents from within the Government, assisted by 
an MCC-funded procurement oversight advisor and supported by MCC-funded 
capacity building and technical assistance. The procurement oversight 
advisor will act as procurement agent in areas where such services are 
required.

[[Page 52933]]

Annex II Summary of the 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 contributions and amounts required effectively to satisfy 
the requirements of Section 2.5(a) of this Compact. In accordance with 
the PIA, 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 PIA), without amending this 
Compact, change the designations and allocations of MCC Funding among 
the Projects, the Project Activities, or any activity under Program 
administration or monitoring and evaluation, or between a Project 
identified as of the entry into force of this Compact and a new 
project; provided, however, that any such change (a) is consistent with 
the Program Objective and Project Objectives, (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 of this Compact, and (d) does not cause the Government's 
obligations or responsibilities or overall contribution of resources to 
be less than specified in Section 2.5(a) of this Compact.

3. Mid-Term Review

    The Parties will jointly conduct a comprehensive mid-term 
performance review at the completion of the second year after entry 
into force. Based on quantifiable performance indicators included in 
the M&E Plan developed pursuant to Annex III, Projects will be rated as 
``underperforming,'' ``satisfactory'' or ``overperforming.'' The 
Parties may agree to modify the Multi-Year Financial Plan in accordance 
with the preceding paragraph to reflect the results of the performance 
review.

                                                         Multi-Year Financial Plan Summary (US$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                 Project                        CIF           Year 1          Year 2          Year 3          Year 4          Year 5           Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Fruit Tree Productivity:
    A. Rain-fed Olive, Almond and Fig          1,992,941      10,178,721      42,019,029      56,225,017      41,559,806      17,531,311     169,506,825
     Tree Intensification and Expansion.
    B. Olive Tree Irrigation and               1,892,000       5,102,247      22,430,100      20,332,624       5,711,029       2,948,856      58,416,856
     Intensification....................
    C. Date Tree Irrigation and                1,052,118       5,875,447      14,084,800      11,518,565       8,646,888       5,858,947      47,036,765
     Intensification....................
    D. Fruit Tree Sector Services.......       2,022,706       4,704,118       5,784,706       5,784,706       4,878,824       2,762,941      25,938,001
        Subtotal........................       6,959,765      25,860,533      84,318,635      93,860,912      60,796,547      29,102,055     300,898,447
2. Small-Scale Fisheries:
    A. Development of Fish Landing Sites       3,935,705      22,331,581      24,601,377      27,923,683       2,202,878       2,184,054      83,179,278
     and Port Facilities................
    B. Development of Wholesale Fish           2,246,640      12,045,242      10,295,442       5,012,015          47,647          47,647      29,694,633
     Markets............................
    C. Support to Mobile Fish Vendors...         823,529       1,070,588         905,882         494,118               0               0       3,294,117
        Subtotal........................       7,005,874      35,447,411      35,802,701      33,429,816       2,250,525       2,231,701     116,168,028
3. Artisan and Fez Medina:
    A. Literacy and Vocational Education               0       3,900,000      10,900,000      10,500,000       5,000,000       2,500,000      32,800,000
    B. Artisan Production...............               0         430,375         430,375       1,446,000       1,446,000         821,000       4,573,750
    C. Fez Medina.......................       6,142,437      11,352,814      21,345,322       9,019,845       8,019,845       8,019,845      63,900,108
    D. Artisan Promotion................               0         200,000         200,000       3,600,000       4,600,000       2,000,000      10,600,000
        Subtotal........................       6,142,437      15,883,189      32,875,697      24,565,845      19,065,845      13,340,845     111,873,858
4. Financial Services:
    A. Access to Funds for Microfinance.               0      13,000,000       8,000,000       2,500,000       2,500,000               0      26,000,000
    B. New Financial Product Development         500,000       1,000,000       2,000,000       1,000,000       1,000,000         500,000       6,000,000

[[Page 52934]]

 
    C. Improvement of Operating                        0       5,300,000       4,100,000       3,200,000         800,000         800,000      14,200,000
     Efficiency and Transparency........
        Subtotal........................         500,000      19,300,000      14,100,000       6,700,000       4,300,000       1,300,000      46,200,000
5. Enterprise Support:
    A. ANPME Training...................               0         690,000         640,000       3,270,000       6,310,733       2,975,335      13,886,068
    B. OFPPT Training...................               0         760,000         260,000       3,570,000       4,872,533       1,190,333      10,652,866
    C. INDH Training....................               0         730,000         180,000       3,450,000       4,097,333         853,733       9,311,066
        Subtotal........................               0       2,180,000       1,080,000      10,290,000      15,280,599       5,019,401      33,850,000
6. Monitoring and Evaluation:
    Monitoring and Evaluation...........       1,840,000       3,666,000       4,041,000       3,643,000       3,030,000       4,523,000      20,743,000
        Subtotal........................       1,840,000       3,666,000       4,041,000       3,643,000       3,030,000       4,523,000      20,743,000
7. Program Administration and Oversight:
    A. MCA-Morocco & Implementing              7,251,924      11,176,660      10,438,942      10,522,703       9,065,939       8,310,499      56,766,667
     Entities...........................
    B. Fiscal Agent.....................         150,000         150,000         154,500         160,500         165,000         170,000         950,000
    C. Procurement Agents...............       2,500,000       1,700,000       1,000,000       1,000,000       1,000,000       1,000,000       8,200,000
    D. Auditing.........................          50,000         100,000         200,000         500,000         500,000         500,000       1,850,000
        Subtotal........................       9,951,924      13,126,660      11,793,442      12,183,203      10,730,939       9,980,499      67,766,667
                                         ---------------------------------------------------------------------------------------------------------------
        Total Estimated MCC Contribution      32,400,000     115,463,793     184,011,475     184,672,776     115,454,455      65,497,501     697,500,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

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 Monitoring and Evaluation Plan (``M&E 
Plan'') for the Program.

1. Overview

    MCC and the Government (or a mutually acceptable Government 
affiliate) 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 Program goal and objectives will be monitored, (``Monitoring 
Component''), (b) process and timeline for the monitoring of planned, 
ongoing, or completed project activities to determine their efficiency 
and effectiveness, and (c) a methodology for assessment and rigorous 
evaluation of the outcomes and impact of the Program (``Evaluation 
Component''). Information regarding the Program's performance, 
including the M&E Plan, and any amendments or modifications thereto, as 
well as progress and other reports, will be made publicly available on 
the Web site of MCA-Morocco and elsewhere.

2. Program Logic

    The M&E Plan will be built on a series of logic models which 
illustrate how the Program, Projects and Project Activities contribute 
to poverty reduction and economic growth in Morocco. The logic models 
below provide a visual representation of each Project's activities and 
the channels through which the activities lead to higher level outcomes 
and objectives. In sum, the goal of the Program is to contribute to 
economic growth and poverty reduction among targeted beneficiaries in 
the fruit tree, small scale fishing, artisan and tourism, and micro, 
small and medium enterprise sectors. The following logic diagrams 
illustrate how the each of the Projects addresses poverty reduction in 
these sectors:
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3. Monitoring Component

    To monitor progress toward the achievement of the impact and 
outcomes, the Monitoring Component of the M&E Plan will identify (a) 
the indicators, (b) the definitions of the indicators, (c) the sources 
and methods for data collection, (d) the frequency for data collection, 
(e) the party or parties responsible, and (f) the timeline for 
reporting on each indicator to MCC.
    Further, the Monitoring Component will track changes in beneficiary 
income during the Compact Term. Before the disbursement of funds for 
each Project, MCA-Morocco will collect baseline data on beneficiary 
income or verify already collected beneficiary income data. One method 
for measuring and calculating beneficiary income across all projects 
will be agreed upon between MCC and MCA-Morocco before entry into force 
of this Compact.
    (a) Indicators. The M&E Plan will measure the results of the 
Program using quantitative, objective and reliable data 
(``Indicators''). Each indicator will have benchmarks that specify the 
expected value and the expected time by which that result will be 
achieved (``Target''). The M&E Plan will be based on a logical 
framework approach that classifies indicators as goal, objective, 
outcome, and output. The Compact Goal indicators (``Goal Indicators'') 
will measure the poverty reduction goal for each Project. Second, the 
Objective Indicator (``Project Objective Indicators'') will measure the 
final result of each Project. Third, Outcome and Output Indicators 
(``Project Activity Indicators'') will measure the early and 
intermediate results of the Project Activities. For each Project 
Activity Indicator, Project Objective Indicator, and Goal Indicator, 
the M&E Plan will define a strategy for obtaining and verifying the 
value of such indicator prior to undertaking any activity that affects 
the value of such Indicator (such value, a ``Baseline''). All 
indicators will be disaggregated by gender, income level and age, and 
beneficiary types to the extent practicable. Subject to prior written 
approval from MCC, MCA-Morocco may add indicators or refine the 
definitions and Targets of existing indicators.
    (i) Goal and Project Objectives. The M&E Plan will contain the Goal 
and Objective Indicators listed in the table below specifying the 
definition, unit of observation, baseline, and end of Compact Target 
for each.

----------------------------------------------------------------------------------------------------------------
                                     Definition of          Unit of
            Indicator                 indicators          measurement          Baseline             Year 5
----------------------------------------------------------------------------------------------------------------
Agricultural net revenue per      Average             $/household/year..  1,131 in rain-fed;  Increase over
 farm.                             agricultural net                        1,756 in PMH;       comparison farms
                                   revenue per farm                        2,082 in oasis.     in year 10: 64%
                                   benefiting from                                             rain-fed, 62%
                                   MCA Project.                                                PMH, 52% oasis.
                                                                                               \2\
Wages and Profits...............  Change in wages     Million $/year....  113...............  Increase 79% over
                                   and profits of                                              baseline and 8%
                                   tourism related                                             over predicted
                                   businesses in Fez.                                          counterfactual.
Wages and Profits...............  Changes in wages    $/month...........  TBD after           TBD after
                                   and profits of                          collection of       collection of
                                   artisans in the                         baseline data.      baseline data.
                                   intervention
                                   areas: potters in
                                   Fez and
                                   Marrakech, all
                                   artisans working
                                   in the fondouks,
                                   the Makina &
                                   Place Lalla
                                   Ydouna.

[[Page 52938]]

 
Total tourist spending in Fez...  Total annual        Million $/year....  226...............  Increase 79% over
                                   tourism spending                                            baseline and 8%
                                   in Fez.                                                     over predicted
                                                                                               counterfactual.
Number of active clients of       Number of           Persons...........  1.2 million.......  4 million.
 microfinance institutions.        individuals who
                                   are active
                                   clients. A person
                                   with more than
                                   one account with
                                   the institution
                                   is counted as a
                                   single client in
                                   this measure.\3\
----------------------------------------------------------------------------------------------------------------
\2\ Year 10 target.
\3\ Target assumes a natural growth of 30 percent in the number of clients. MCC economic analysis estimates that
  the increase in clients due to the Project will range from .25 to 1 percent above the natural growth rate. Of
  the 4 million, 43,000 to 174,000 new clients are as a result of the Project.

    (ii) Project Activity Indicators. The M&E Plan will contain Project 
Activity Indicators which will measure the results for the five main 
Projects and are listed below with their definitions and units of 
observation. Prior to the disbursement of MCC Funding for any Project 
Activity, the Implementing Entity of that Project Activity must propose 
a final set of Activity Indicators that is approved in writing by its 
Project Manager, MCA-Morocco and MCC. The M&E Plan will be amended to 
reflect the addition of such indicators.

----------------------------------------------------------------------------------------------------------------
                                                            Unit of
           Indicators                 Definition          measurement          Baseline             Year 5
----------------------------------------------------------------------------------------------------------------
                                       Project 1: Fruit Tree Productivity
----------------------------------------------------------------------------------------------------------------
Total annual volume of            Total volume of     000 metric tons     Rain-fed: 50.4;     Increase over
 production of dates and olives.   production of       (MT).               PMH: 28.4; Oasis:   baseline: Rain-
                                   olives and dates                        13.7.               fed: 45%; PMH:
                                   on farms                                                    30.2%; Oasis:
                                   benefiting from                                             26.7%.
                                   MCA Project
                                   rehabilitation
                                   activities.
Total annual value of production  Total value of      Millions US$......  Rain-fed: 20.75;    Increase over
 of dates and olives.              production of                           PMH: 12.1; Oasis:   baseline: Rain-
                                   olives and dates                        5.36.               fed: 45%; PMH:
                                   at the farm gate                                            30.2%; Oasis:
                                   on farms                                                    26.7%.
                                   benefiting from
                                   MCA Project
                                   rehabilitation
                                   activities.
----------------------------------------------------------------------------------------------------------------
                        Rain-fed Olive, Almond and Fig Tree Intensification and Expansion
----------------------------------------------------------------------------------------------------------------
Cropped area covered by olive     Share of per farm   %.................  24................  37.
 trees.                            cropped area
                                   targeted by the
                                   project that is
                                   covered by olive
                                   trees as a
                                   percentage of
                                   SAU, on farms
                                   benefiting from
                                   MCA Project.
Survival rate of newly planted    Number of olive     %.................  N/A...............  95.
 olive trees after 2 years         trees alive as a
 project-supported establishment   share of total
 period.                           number planted
                                   under MCA project.
Yield of rehabilitated olive      Yield of            MT/ha.............  1.11..............  1.44.
 trees.                            rehabilitated
                                   olive trees on
                                   farms benefiting
                                   from MCA Project.
----------------------------------------------------------------------------------------------------------------
                                    Olive Tree Irrigation and Intensification
----------------------------------------------------------------------------------------------------------------
Cropped area covered by olive     Share of per farm   %.................  50................  66.
 trees.                            cropped area
                                   targeted by the
                                   project that is
                                   covered by olive
                                   trees as a
                                   percentage of
                                   SAU, on farms
                                   benefiting from
                                   MCA Project.
Yield of rehabilitated olive      Yield of            MT/ha.............  1.96..............   2.94.
 trees.                            rehabilitated
                                   olive trees on
                                   farms benefiting
                                   from MCA project.
----------------------------------------------------------------------------------------------------------------
                                    Date Tree Irrigation and Intensification
----------------------------------------------------------------------------------------------------------------
Cropped area covered by date      Share of per farm   %.................  56................  76.
 trees.                            cropped area
                                   targeted by the
                                   project that is
                                   covered by date
                                   trees as a
                                   percentage of
                                   SAU, on farms
                                   benefiting from
                                   MCA Project.

[[Page 52939]]

 
Yield of rehabilitated date       Yield of            MT/ha.............  1.69..............  2.17.
 palms.                            rehabilitated
                                   date palms, by
                                   tree and unit
                                   area.
----------------------------------------------------------------------------------------------------------------
                                        Project II: Small-Scale Fisheries
----------------------------------------------------------------------------------------------------------------
State of fish stock.............  State of the fish   Scale rating for a  \4\ TBD...........  Fish stock not
                                   stock fished for    basket of fish                          fished beyond
                                   a basket of fish    species from                            fully utilized.
                                   species by zone     under-utilized to
                                   and scored          recovering.
                                   according to the
                                   following
                                   categories:
                                   Underutilized,
                                   fully utilized,
                                   over-fished or
                                   recovering.
Domestic fish consumption level.  Average annual per  kg/person/year....  12................  14.
                                   capita
                                   consumption.\5\
----------------------------------------------------------------------------------------------------------------
                              Development of Fish Landing Sites and Port Facilities
----------------------------------------------------------------------------------------------------------------
Fisherman net revenue...........  Average annual net  US$/fisherman/year  3,887.............  Increase 30% over
                                   revenue for                                                 baseline.
                                   fishermen
                                   accessing PDA
                                   facilities
                                   benefiting from
                                   MCA Project.
Average fisherman sales price at  Average sales       MAD/kg............  37.57.............  Increase 19% over
 PDA.                              price received by                                           baseline.
                                   small scale
                                   fisherman at PDA
                                   for a basket of
                                   fish.\5\
----------------------------------------------------------------------------------------------------------------
                                      Development of Wholesale Fish Markets
----------------------------------------------------------------------------------------------------------------
Volume sold at wholesale markets  Total volume of     MT................  66,446............  Increase 35% over
                                   fish sold among 6                                           the baseline
                                   wholesale markets                                           value.
                                   targeted for MCA
                                   investment.
Fish sale price.................  Average sale price  MAD/kg............  7.................  Increase 5% over
                                   at 6 wholesale                                              the baseline
                                   markets targeted                                            value.
                                   for MCA
                                   investment for an
                                   established
                                   basket of fish
                                   species.\5\
----------------------------------------------------------------------------------------------------------------
                                         Support to Mobile Fish Vendors
----------------------------------------------------------------------------------------------------------------
Average sales price.............  Average sale price  MAD/kg............  5.................  Increase 15% over
                                   of fish sold to a                                           baseline.
                                   consumer for a
                                   representative
                                   basket of
                                   fish.\6\
Volume of sales among mobile      Average daily       kg/day............  240...............  Increase 10% over
 fish vendors.                     volume of fish                                              baseline.
                                   sold.
----------------------------------------------------------------------------------------------------------------
                                       Project III: Artisan and Fez Medina
----------------------------------------------------------------------------------------------------------------
Average revenue of potters        Average revenue of  US$/year..........  5,238.............  Increase of 15%
 receiving Artisan Production      potters.                                                    over baseline.
 Activity (Marrakech & Fez).
Employment and wages among        OFPPT trainees'     US$ and %.........  TBD after           TBD after
 Project graduates.                income wages,                           collection of       collection of
                                   employment levels.                      baseline data.      baseline data.
Tourist arrivals................  Annual number of    Tourists..........  350,000...........  Increase of 67%
                                   tourists arriving                                           over the baseline
                                   to city of Fez.                                             value.
Artisan profits (artisans         To be defined upon  US$/year..........  TBD after design    TBD after design
 engaged in product finishing      completion of                           competition award.  competition
 and points of sale).              design                                                      award.
                                   competitions.
Employment created..............  Number of person    person days.......  TBD after design    TBD after design
                                   days of                                 competition award.  competition
                                   employment                                                  award.
                                   created.
SME value added.................  Value added of      US$...............  TBD after targeted  TBD after targeted
                                   firms targeted                          firms are           firms are
                                   for promotional                         identified.         identified.
                                   support.
----------------------------------------------------------------------------------------------------------------

[[Page 52940]]

 
                                         Project IV: Financial Services
----------------------------------------------------------------------------------------------------------------
Gross loan portfolio outstanding  All outstanding     US$...............  411,764,706.......  1,176,470,588
 of microcredit associations       principal for all
 (AMCs).                           outstanding
                                   client loans,
                                   including
                                   current,
                                   delinquent and
                                   restructured
                                   loans, but not
                                   loans that have
                                   been written off.
                                   It does not
                                   include interest
                                   receivable. It
                                   does not include
                                   employee
                                   loans.\7\
Portfolio at risk > 30 days       Portfolio at Risk   %.................  1.5...............  1
 ratio.                            > 30 days/Gross
                                   Loan Portfolio
                                   for all active
                                   AMCs.
     Operating Expense Ratio      Expenses related    %.................  20................  17
                                   to operations,
                                   such as all
                                   personnel
                                   expenses, rent
                                   and utilities,
                                   transportation,
                                   office supplies,
                                   and depreciation/
                                   average loan
                                   portfolio
                                   outstanding for
                                   all active AMCs.
----------------------------------------------------------------------------------------------------------------
                                          Project V: Enterprise Support
----------------------------------------------------------------------------------------------------------------
Average annual sales of           Average annual      US$...............  TBD after           Increase of US$588
 participating businesses.         sales per full-                         collection of       in 2007 prices as
                                   time-equivalent.                        baseline data.      compared to a
                                                                                               control group.\8\
Survival rate of participating    Survival rate of    %.................  TBD after           Increase of 10% as
 businesses.                       SMEs receiving                          collection of       compared to a
                                   training.                               baseline data.      control group.\9\
----------------------------------------------------------------------------------------------------------------
\4\ Fish species to compose basket and accompanying values for baseline stock assessments will be calculated
  before Project Activities begin.
\5\ Fish consumption will be measured in areas served by wholesale markets benefiting from MCA investments.
\6\ Basket of fish to be determined before EIF.
\7\ Target assumes a natural growth rate of 30 percent in number of clients.
\8\ The methodology should be difference in difference: The difference in the mean increase in sales comparing
  treatment group verses control group should be greater than US$588 (5,000 MAD) at 2007 prices. This mean
  difference should be statistically significant at the ten percent level, and the official Moroccan consumer
  price index should be used to deflate values in prices of future years to 2007 prices.
\9\ Example: 70 percent of firms in the treatment group survive to the end of year 2 and 60 percent of firms in
  the control group survive to the end of year 2. Since 70 is 16.6 percent higher than 60, the 10 percent
  criteria is satisfied.

    (b) Data Collection and Reporting: The M&E Plan will establish 
guidelines for data collection and a reporting framework, including a 
schedule of MCC's Program reporting requirements and an identification 
of responsible parties. Compliance with data collection and reporting 
timelines will be conditions for disbursements for the relevant Project 
Activities as set forth in the Program Implementation Agreement. The 
M&E Plan will specify the data collection methodologies, procedures, 
and analysis required for reporting on results at all levels. The M&E 
Plan will also establish one method for measuring and calculating 
beneficiary income across all projects, in addition to describing any 
interim MCC approvals for data collection, analysis, and reporting 
plans.
    (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 
valid, reliable, and timely 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 those levels of quality are not possible, given the 
realities of data collection.
    (d) Management Information System: The M&E plan will describe the 
information system that will be used to collect data, store, process 
and deliver information to relevant stakeholders in such a way that the 
Program information collected and verified pursuant to the M&E Plan is 
at all times accessible and useful to those who wish to use it. The 
system development will take into consideration the requirement and 
data needs of the components of the Program, and will be aligned with 
MCC existing systems, other service providers, and government 
ministries.
    (e) Role of MCA-Morocco. The monitoring and evaluation of this 
Compact spans across five discrete Projects and will involve a variety 
of governmental, non-governmental, and private sector institutions. 
MCA-Morocco holds full responsibility for implementation of the M&E 
Plan. MCA-Morocco will oversee all Compact-related monitoring and 
evaluation activities conducted by each of the Projects, ensuring that 
data from all implementing entities is consistent, and accurately 
reported and aggregated into regular Compact performance reports as 
described in the M&E Plan.

4. Evaluation Component

    The Evaluation Component of the M&E plan will contain three types 
of evaluations: Impact Evaluations, Project Performance Evaluations, 
and Special Studies. Plans for each type of evaluation will be 
finalized before MCC Disbursement or re-disbursement of an MCC 
Disbursement for specific Program or Project activities. The Evaluation 
Component of the M&E Plan will describe the purpose of the evaluation, 
methodology, timeline, required MCC approvals, as well as the process 
for collection and analysis of data for each evaluation. The results of 
all evaluations will be made publicly available in accordance with MCC 
M&E Guidelines.
    (a) Impact Evaluation: The M&E plan will include a description of 
the methods to be used for impact evaluations and plans for integrating 
the evaluation method into project design. Based on in-country 
consultation with stakeholders, the following strategies

[[Page 52941]]

outlined below were jointly determined as having the strongest 
potential for rigorous impact evaluation. The M&E plan will further 
outline in detail these methodologies. Final impact evaluation 
strategies are to be jointly determined before the approval of the M&E 
plan and before entry into force of this Compact. The following are a 
summary of the potential impact evaluation methodologies:
    (i) Enterprise Support Project: The pilot phase of the Enterprise 
Support Project will be assessed through an impact evaluation using 
randomized treatment and control groups. The pilot program will include 
business training for approximately 600 small businesses and a control 
group of approximately equal size (as determined by the evaluation 
design). Results will be used to decide whether or not to expand 
Project activities in Year 3 of the Compact Term. The impact of 
training and technical support will be assessed based on the enterprise 
support economic rate of return model agreed by the Parties. For each 
pilot program assessed, a minimum sample size will be established by 
the impact evaluation design before the pilot begins. Once data is 
available from the minimum sample of firms, or at the mid-term review, 
whichever comes first, such data will be used to calculate the economic 
rate of return using the model to be included as part of the M&E Plan. 
A pilot program will be scaled up only if the economic rate of return 
from the model is above 15 percent and the results are statistically 
significant at the ten percent level.
    (ii) Technical Assistance and Training for Fruit Tree Producers: 
The purpose of the impact evaluation is to evaluate the effectiveness 
of technical assistance and the extension methods used in the Project. 
The evaluation would focus on rehabilitation activities under the 
Project to refine the effectiveness of technical assistance which will 
be based from the outset on best practices.
    (iii) Improvement of Operating Efficiency and Transparency in the 
Financial Services Sector: There are two potential evaluation designs 
under consideration for the Financial Services Project. The first 
evaluation would assess technologies funded through the Support to 
Innovative Technologies Activity. The purpose of the evaluation is to 
learn which of the technologies funded through the grant facility is 
most effective for lowering operating costs and expanding access to 
credit. The facility would structure awards so that technology programs 
could be evaluated using credible control or comparison groups. As 
such, the grant facility would require that microfinance associations 
receiving grants participate in the evaluation of the technology 
proposed. A second evaluation under consideration would assess the 
extent to which mobile branches funded through this Compact are 
effective in expanding access to credit as compared to fixed branches 
or other methods.
    (iv) New Financial Product Development: If the financial sector 
transformation activities allow, the Financial Services Project will 
develop an evaluation of the new products available to micro-
enterprises. This impact evaluation could provide additional 
information on how best to market the new products to institution 
clients and identify which products are most effective at improving 
household income.
    The M&E plan also will specify different modes of contracting to 
carry out the evaluations, including independent and specialized 
contractors and agreements where necessary.
    (b) Project Performance Evaluations. The M&E Plan will make 
provision for project level evaluations. MCA-Morocco, with the prior 
written approval of MCC, will engage independent evaluators to design 
the Project Performance Evaluations to be conducted at the midpoint and 
at the end of each Project. Or, at MCC's election, MCC will engage the 
independent evaluators. The Project Performance Evaluations must at a 
minimum (i) evaluate the efficiency and effectiveness of the Project 
Activities; (ii) estimate, quantitatively and in a statistically valid 
way, the causal relationship between the expected impact (to the extent 
possible), the intended outcomes and outputs; (iii) determine if and 
analyze the reasons why this Compact Goal, Program Objectives and 
Project Objectives were or were not achieved; (iv) identify positive 
and negative unintended results of the Program; (v) provide lessons 
learned that may be applied to similar projects; (vi) assess the 
likelihood that results will be sustained over time; and (vii) any 
other guidance and direction that will be provided in the M&E Plan. To 
the extent engaged by MCA-Morocco, such an independent evaluator will 
review the plans for the collection of baseline data and, as 
applicable, plans for selecting comparison groups.
    (c) Special Studies. The M&E plan will include a description of the 
methods to be used for Special Studies funded through this Compact or 
by MCC. Based on in-country consultations, the following Special 
Studies should provide crucial information in evaluating the success of 
the Financial Services Project:
    (i) Assessment of the Microcredit Sector: A reporting system will 
be established to inform the extent to which lending by microcredit 
institutions to clients is higher with Jaida than in its absence. This 
will entail recording baseline data going back several years before 
entry into force of this Compact and updating this data throughout 
implementation of the Program. Data is likely to include information on 
the key assets and liabilities of microcredit associations as well as 
the distribution of funding sources. Details of this reporting system 
will be agreed to by the Parties.
    (ii) Assessment of Return to Investments Made with Microcredit: A 
small panel survey will be conducted at regular intervals to estimate 
the economic returns that microcredit clients are earning on their 
loans. Details of this tracking survey will be agreed to by the Parties 
before entry into force of this Compact.
    Plans for conducting the Special Studies described above will be 
determined jointly between MCA-Morocco and MCC before the approval of 
the M&E plan and before entry into force of this Compact. The M&E plan 
will identify and make provision for any other special studies, ad hoc 
evaluations, and research that may be needed as part of the monitoring 
and evaluating of this Compact. Either MCC or MCA-Morocco may request 
special studies or ad hoc evaluations of Projects, Project Activities, 
or the Program as a whole prior to the expiration of the Compact Term. 
When MCA-Morocco engages the evaluator, the evaluator will be an 
externally contracted and independently source selected by MCA-Morocco. 
The aforementioned engagement will be 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 or supplemental agreement. Contract terms for all 
evaluations will prevent project implementers from biasing results or 
inhibiting the publication of results. MCC will approve terms of 
reference, selection of evaluation panels, data collection plans, and 
evaluation implementation plans.
    (d) Request for Ad Hoc Evaluation or Special Study: If MCA-Morocco 
requires an ad hoc independent evaluation or special study at the 
request of the Government of Morocco for any reason, including for the 
purpose of contesting an MCC determination with respect to a

[[Page 52942]]

Project or Project Activity or to seek funding from other donors, no 
MCC Funding or MCA-Morocco resources may be applied to such evaluation 
or special study without MCC's prior written approval.

5. Other Components of the M&E Plan

    In addition to the Monitoring and 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 cost 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 
Project Activity Outcomes. However, such assumptions and risks will not 
excuse Parties' performance unless otherwise expressly agreed to in 
writing by all Parties.

6. 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, PIA, and any other relevant supplemental agreement.
    (b) Modifications. Notwithstanding anything to the contrary in this 
Compact, including the requirements of this M&E Annex, MCC and the 
Government (or a mutually acceptable Government affiliate or permitted 
designee) may modify or amend the M&E Plan or any component thereof, 
including those elements described herein, without amending this 
Compact; provided, any such modification or amendment of the M&E Plan 
has been approved by MCC in writing and is otherwise consistent with 
the requirements of this Compact and any relevant supplemental 
agreement between the Parties.

[FR Doc. E7-18265 Filed 9-14-07; 8:45 am]
BILLING CODE 9211-03-P