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


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MILLENNIUM CHALLENGE CORPORATION

[MCC FR 07-12]


Notice of Entering Into a Compact With the Government of Mongolia

AGENCY: Millennium Challenge Corporation.

ACTION: Notice.

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SUMMARY: In accordance with section 610(b)(2) of the Millennium 
Challenge Act of 2003 (Pub. L. 108-199, Division D), the Millennium 
Challenge Corporation (MCC) is publishing a summary and the complete 
text of the Millennium Challenge Compact between the United States of 
America, acting through the Millennium Challenge Corporation, and the 
Government of Mongolia. The President of the United States of America 
and the President of Mongolia executed the Compact documents on October 
22, 2007.

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

Summary of Millennium Challenge Compact With the Government of Mongolia

A. Introduction

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

B. Program Overview and Budget

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

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

[[Page 61382]]

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

[[Page 61383]]

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

C. Program Management

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

D. Assessment

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

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


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

[[Page 61384]]

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

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

[[Page 61385]]

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

[[Page 61386]]

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

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

Table of Contents

Article 1. Goal and Objectives
    Section 1.1 Compact Goal
    Section 1.2 Project Objectives
Article 2. Funding and Resources
    Section 2.1 MCC Funding
    Section 2.2 Compact Implementation Funding
    Section 2.3 Disbursement
    Section 2.4 Interest
    Section 2.5 Government Resources; Budget
    Section 2.6 Limitations on the Use of MCC Funding
    Section 2.7 Taxes
Article 3. Implementation
    Section 3.1 Program Implementation Agreement
    Section 3.2 Government Responsibilities
    Section 3.3 Policy Performance
    Section 3.4 Government Assurances
    Section 3.5 Implementation Letters
    Section 3.6 Procurement
    Section 3.7 Records; Accounting; Covered Providers; Access
    Section 3.8 Audits; Reviews
Article 4. Communications
    Section 4.1 Communications
    Section 4.2 Representatives
    Section 4.3 Signatures
Article 5. Termination; Suspension; Refunds
    Section 5.1 Termination; Suspension
    Section 5.2 Refunds; Violation
    Section 5.3 Survival
Article 6. Compact Annexes; Amendments; Governing Law
    Section 6.1 Annexes
    Section 6.2 Inconsistencies
    Section 6.3 Amendments
    Section 6.5 Additional Instruments
    Section 6.6 References to MCC Website
    Section 6.7 Indemnification
Article 7. Entry Into Force
    Section 7.1 Domestic Requirements
    Section 7.2 Conditions Precedent to Entry into Force
    Section 7.3 Date of Entry into Force
    Section 7.4 Compact Term
Annex I: Summary of Program
Annex II: Summary of Multi-Year Financial Plan
Annex III: Summary of Monitoring and Evaluation Plan
Annex IV: Definitions

Millennium Challenge Compact

Preamble

    This Millennium Challenge Compact (this ``Compact'') is between the 
United States of America, acting through the Millennium Challenge 
Corporation, a United States government corporation (``MCC''), and the 
Government of Mongolia (the ``Government'').
    Recalling that the Government consulted with the private sector and 
civil society of Mongolia to determine the priorities for the use of 
Millennium Challenge Account assistance and developed and submitted to 
MCC a proposal for such assistance; and
    Recognizing that MCC wishes to help Mongolia implement a program to 
achieve the Compact Goal and Project Objectives described herein (the 
``Program'');
    The Government and MCC (the ``Parties'') hereby agree as follows:

Article 1. Goal and Objectives

Section 1.1 Compact Goal

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

Section 1.2 Project Objectives

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

Article 2. Funding and Resources

Section 2.1 MCC Funding

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

Section 2.2 Compact Implementation Funding

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

[[Page 61387]]

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

Section 2.3 Disbursement

    In accordance with this Compact and the Program Implementation 
Agreement, MCC shall disburse MCC Funding for expenditures incurred in 
connection with the implementation of the Program (each, a 
``Disbursement''). The proceeds of such Disbursements shall be made 
available to the Government, at MCC's sole election, (a) by deposit to 
a bank account established by the Government and acceptable to MCC (a 
``Permitted Account'') or (b) through direct payment to the relevant 
provider of goods, works or services in furtherance of this Compact. 
MCC Funding shall be expended solely to cover expenditures in 
connection with the implementation of the Program as provided in this 
Compact and the Program Implementation Agreement.

Section 2.4 Interest

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

Section 2.5 Government Resources; Budget

    (a) The Government shall provide all funds and other resources, and 
shall take all actions, that are necessary to carry out the 
Government's responsibilities and obligations under this Compact.
    (b) The Government shall use its best efforts to ensure that all 
MCC Funding it receives, or is projected to receive, in each of its 
fiscal years is fully accounted for in its annual budget on a multi-
year basis.
    (c) The Government shall not reduce the normal and expected 
resources that it would otherwise receive, or budget, from sources 
other than MCC for the activities contemplated under this Compact and 
the Program.

Section 2.6 Limitations on the Use of MCC Funding

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

Section 2.7 Taxes

    (a) The Government shall ensure that the assistance provided by MCC 
to the Government under this Compact is exempt from any existing or 
future taxes, duties, levies, contributions or other similar charges 
(``Taxes'') by the Government (including any such Taxes of a national, 
regional, local or other governmental or taxing authority) in 
accordance with the terms of the ``Agreement Between the Government of 
the United States of America and the Government of Mongolia Concerning 
Economic, Technical, and Related Assistance,'' which entered into force 
on September 8, 1992.
    (b) If any Tax has been levied and paid to the Government contrary 
to the requirements of section 2.7(a) above, the Government shall 
refund promptly to MCC the amount of such Tax out of its national 
funds. No MCC Funding, proceeds thereof, nor any Program asset may be 
applied by the Government in satisfaction of its obligations under this 
section 2.7.

Article 3. Implementation

Section 3.1 Program Implementation Agreement

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

Section 3.2 Government Responsibilities

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

[[Page 61388]]

under this Compact, the Program Implementation Agreement or any other 
agreement related thereto or any transaction contemplated thereunder.
    (c) The Government shall ensure that any assets or services funded 
in whole or in part (directly or indirectly) by MCC Funding will be 
used solely in furtherance of this Compact and the Program.

Section 3.3 Policy Performance

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

Section 3.4 Government Assurances

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

Section 3.5 Implementation Letters

    From time to time, MCC may provide guidance to the Government in 
writing on any matters relating to MCC Funding, this Compact or 
implementation of the Program (each, an ``Implementation Letter''). The 
Government shall apply such guidance in implementing the Program.

Section 3.6 Procurement

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

Section 3.7 Records; Accounting; Covered Providers; Access

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

Section 3.8 Audits; Reviews

    (a) Government Audits. Except as the Parties may otherwise agree in 
writing, the Government shall, on at least a semi-annual basis, 
conduct, or cause to be conducted, financial audits of all 
disbursements of MCC Funding covering the period from signing of this 
Compact until the earlier of the following December 31 or June 30 and 
covering each six-month period thereafter ending December 31 and June 
30, through the end of the Compact Term, in accordance with the terms 
of the Program Implementation Agreement. In addition, upon MCC's 
request, the Government shall use, or cause to be used, to conduct such 
audits an independent auditor approved by MCC and named on the list of 
local auditors approved by the Inspector General of the Millennium 
Challenge Corporation (the ``Inspector General'') or a United States-
based certified public accounting firm selected in accordance with the 
``Guidelines for Financial Audits Contracted by MCA'' (the ``Audit 
Guidelines'') issued and revised from time to time by the Inspector 
General. Audits shall be performed in accordance with the Audit 
Guidelines and be subject to quality assurance oversight by the 
Inspector General. Each audit shall be completed and the audit report 
delivered to MCC no later than 90 days after the first period to be 
audited and no later than 90 days after each June 30 and December 31 
thereafter, unless the Parties agree otherwise in writing.
    (b) Audits of United States Entities. The Government shall ensure 
that agreements between the Government or

[[Page 61389]]

any Provider, on the one hand, and a United States non-profit 
organization, on the other hand, that are financed with MCC Funding 
state that the United States non-profit organization is subject to the 
applicable audit requirements contained in OMB Circular A-133 issued by 
the United States Government Office of Management and Budget. The 
Government shall ensure that agreements between the Government or any 
Provider, on the one hand, and a United States for-profit Covered 
Provider, on the other hand, that are financed with MCC Funding state 
that the United States organization is subject to audit by the 
applicable United States Government agency, unless the Government and 
MCC agree otherwise in writing.
    (c) Corrective Actions. The Government shall use its best efforts 
to ensure that Covered Providers take, where necessary, appropriate and 
timely corrective actions in response to audits, consider whether a 
Covered Provider's audit necessitates adjustment of the Government's 
records, and require each such Covered Provider to permit independent 
auditors to have access to its records and financial statements as 
necessary.
    (d) Audit by MCC. MCC shall have the right to arrange for audits of 
the Government's use of MCC Funding.
    (e) Cost of Audits, Reviews or Evaluations. MCC Funding may be used 
to fund the costs of any audits, reviews or evaluations required under 
this Compact, including as reflected in Annex II.

Article 4. Communications

Section 4.1 Communications

    Any document or communication required or submitted by either Party 
to the other under this Compact shall be in writing and, except as 
otherwise agreed between the Parties, in English. Notice is deemed duly 
given: (a) Upon personal delivery to the Party notified, (b) when sent 
by confirmed fax or email, if sent during normal business hours of the 
recipient Party, if not, then on the next business day, or (c) two 
business days after deposit with an internationally recognized 
overnight courier, specifying next day delivery. For this purpose, the 
address of each Party is set forth below.
    To MCC:
    Millennium Challenge Corporation, Attention: Vice President for 
Operations (with a copy to the Vice President and General Counsel), 875 
Fifteenth Street, NW., Washington, DC 20005, United States of America, 
Facsimile: (202) 521-3700, Telephone: (202) 521-3600, E-mail: 
[email protected] (Vice President for Operations), 
[email protected] (Vice President and General Counsel).
    To the Government: 
    Ministry of Finance, Attention: Hon. Nadmid Bayartsaikhan, Minister 
of Finance, Government Building 2, United Nation's Street 5/1, 
Chingeltei District, Ulaanbaatar-210646, Mongolia, Facsimile: 976-11-
322866, Telephone: 976-51-262155, E-mail: 
[email protected].
    With a copy to MCA-Mongolia:
    At an address, and to the attention of the person, to be designated 
in writing to MCC by the Government.

Section 4.2 Representatives

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

Section 4.3 Signatures

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

Article 5. Termination; Suspension; Refunds

Section 5.1 Termination; Suspension

    (a) Either Party may terminate this Compact in its entirety by 
giving the other Party thirty (30) days' written notice.
    (b) MCC may, immediately, upon written notice to the Government, 
suspend or terminate this Compact or MCC Funding under this Compact, in 
whole or in part, if MCC determines that any circumstance identified by 
MCC as a basis for suspension or termination has occurred, which 
circumstances include but are not limited to the following:
    (i) The Government fails to comply with its obligations under this 
Compact, the Program Implementation Agreement or any other agreement or 
arrangement entered into by the Government or MCA-Mongolia in 
connection with this Compact or the Program;
    (ii) An event has occurred that, in MCC's determination, makes it 
probable that one or more of the Project Objectives will not be 
achieved during the term of this Compact or that the Government will 
not be able to perform its obligations under this Compact;
    (iii) A use of MCC Funding or continued implementation of this 
Compact has or would violate applicable law or United States Government 
policy, whether now or hereafter in effect;
    (iv) The Government or any other person or entity receiving MCC 
Funding or using assets acquired in whole or in part with MCC Funding 
is engaged in activities that are contrary to the national security 
interests of the United States;
    (v) An act has been committed or an omission or an event has 
occurred that would render Mongolia ineligible to receive United States 
economic assistance under Part I of the Foreign Assistance Act of 1961, 
as amended (22 U.S.C. 2151 et seq.), by reason of the application of 
any provision of the Foreign Assistance Act of 1961 or any other 
provision of law;
    (vi) The Government has engaged in a pattern of actions 
inconsistent with the criteria used to determine the eligibility of 
Mongolia for assistance under the Millennium Challenge Act of 2003, as 
amended; and
    (vii) The Government or another person or entity receiving MCC 
Funding or using assets acquired in whole or in part with MCC Funding 
is found to have been convicted of a narcotics offense or to have been 
engaged in drug trafficking.
    (c) All Disbursements shall cease upon the expiration, suspension, 
or termination of this Compact; provided, however, that MCC Funding may 
be used, in compliance with this Compact and the Program Implementation 
Agreement, to pay for (i) reasonable expenditures for goods, works or 
services that are properly incurred under or in furtherance of this 
Compact before such expiration, suspension or termination of this 
Compact, and (ii) reasonable expenditures (including administrative 
expenses) properly incurred in connection with the winding up of the 
Program within one hundred and twenty (120) days after the expiration, 
suspension or termination of this Compact, so long as the request for 
such expenditures is submitted within ninety (90) days after such 
expiration, suspension or termination.
    (d) Subject to subsection (c) of this section 5.1, upon the 
expiration, suspension or termination of this

[[Page 61390]]

Compact, (i) any amounts of MCC Funding not disbursed by MCC to the 
Government shall be released from any obligation in connection with 
this Compact without any action from the Government or MCC, and (ii) 
any amounts of MCC Funding disbursed by MCC but not expended under 
section 2.3 before such expiration, suspension or termination, plus 
accrued interest thereon, shall be returned to MCC within thirty (30) 
days after the Government receives MCC's request for such return.
    (e) MCC may reinstate any suspended or terminated MCC Funding under 
this Compact if MCC determines that the Government or other relevant 
person or entity has committed to correct each condition for which MCC 
Funding was suspended or terminated.

Section 5.2 Refunds; Violation

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

Section 5.3 Survival

    The Government's responsibilities under sections 2.4, 2.6, 2.7, 
3.7, 3.8, 5.1(c), 5.1(d), 5.2, 5.3, 6.4 and 6.7 of this Compact shall 
survive the expiration, suspension or termination of this Compact.

Article 6. Compact Annexes; Amendments; Governing Law

Section 6.1 Annexes

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

Section 6.2 Inconsistencies

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

Section 6.3 Amendments

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

Section 6.4 Governing Law; Status

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

Section 6.5 Additional Instruments

    Any reference to activities, obligations or rights undertaken or 
existing under or in furtherance of this Compact or similar language 
shall 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 Website

    Any reference in this Compact, the Program Implementation Agreement 
or any other agreement entered into in connection with this Compact to 
a document or information available on, or notified by posting on, the 
MCC Website shall be deemed a reference to such document or information 
as updated or substituted on the MCC Website from time to time.

Section 6.7 Indemnification

    The Government shall indemnify and hold MCC and any MCC officer, 
director, employee, affiliate, contractor agent or representative (each 
of MCC and any such persons, an ``MCC Indemnified Party'') harmless 
from and against, and shall compensate, reimburse and pay such MCC 
Indemnified Party for, any liability or other damage that both:
    (a) Is (directly or indirectly) suffered or incurred by such MCC 
Indemnified Party, or to which any MCC Indemnified Party may otherwise 
become subject, regardless of whether or not such damages relate to any 
third-party claims; and
    (b) Arises from or as a result of the negligence or willful 
misconduct of the Government or any Government affiliate (including 
MCA-Mongolia) (directly or indirectly) connected with, any activities 
(including acts and omissions) undertaken in the furtherance of this 
Compact; provided, however, that the Government shall apply national 
funds to satisfy its obligations under this section 6.7, and no MCC 
Funding or Program assets may be applied by the Government in 
satisfaction of its obligations under this section 6.7.

Article 7. Entry Into Force

Section 7.1 Domestic Requirements

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

Section 7.2 Conditions Precedent to Entry Into Force

    Before this Compact enters into force:
    (a) The Government and MCC shall execute the Program Implementation 
Agreement;
    (b) This Compact shall be ratified by the State Great Khural 
(Parliament) of Mongolia after it is signed;
    (c) The Government shall deliver to MCC:
    (i) A certificate signed and dated by the Principal Representative 
of the Government (or such other duly authorized representative of the 
Government acceptable to MCC) certifying that the Government has taken 
all steps required under section 7.1;
    (ii) A legal opinion from the Minister of Justice and Internal 
Affairs in form and substance satisfactory to MCC; and
    (iii) Complete, certified copies of all decrees, legislation, 
regulations or other governmental documents relating to its domestic 
requirements for this Compact to enter into force and the satisfaction 
of Section 7.1, which MCC may post on its website or otherwise make 
publicly available; and
    (d) MCC must determine that, after signature of this Compact, the 
Government has not engaged in any action or omission that is 
inconsistent with the eligibility criteria for MCC Funding.

[[Page 61391]]

Section 7.3 Date of Entry Into Force

    This Compact shall 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 shall remain in force for five years after its entry 
into force, unless terminated earlier under section 5.1 (the ``Compact 
Term'').
    In Witness Whereof, the undersigned, duly authorized by their 
respective governments, have signed, in duplicate, this Compact this 
22nd day of October, 2007.
    Done at Washington, D.C.
    For Millennium Challenge Corporation, on behalf of the United 
States of America, Name: George W. Bush, Title: President of the United 
States of America.
    For the Government of Mongolia, Name: Nambaryn Enkhbayar, Title: 
President of Mongolia.

Annex I Summary of Program

A. Program Overview

    This Annex I to the Compact summarizes the Program that MCC Funding 
will support in Mongolia during the Compact Term.
1. Background
    Mongolia is landlocked between Russia and China, with approximately 
2.6 million inhabitants in a territory of 1.56 million square 
kilometers. Nearly half of the population is concentrated in 
Ulaanbaatar, its capital, approximately 60 percent is located along the 
rail corridor between Russia and China, and the remainder is largely 
dispersed throughout the country. Mongolia's aging transport 
infrastructure and weak institutions are a significant constraint to 
economic growth and development, particularly given the pressures of 
the country's abrupt transition to a market economy, the collapse of 
financial support from Russia, and the rapid urbanization of what 
traditionally has been a highly dispersed rural herding society. The 
Program is intended to release the potential of certain critical 
interlocking human, institutional, and physical resources that factor 
centrally in Mongolia's efforts to broaden and deepen economic 
development. The Program is expected to have a significant direct 
impact on individuals living in poverty, and significant indirect and 
ancillary benefits by creating new economic opportunities and 
increasing the capacity of individuals and groups to participate fully 
in and benefit from economic growth.
2. Program
    The Program consists of the Rail Project, the Property Rights 
Project, the Vocational Education Project, and the Health Project, as 
further described below (each, a ``Project'').
    The Parties may agree to modify or eliminate any Project, or to 
create a new project, in writing signed by the Principal Representative 
of each Party without amending this Compact; provided, however, that 
any such modification or elimination of a Project, or creation of a new 
project, shall not cause the amount of MCC Funding to exceed the 
aggregate amount specified in Section 2.1 of this Compact, cause the 
Government's responsibilities or contribution of resources to be less 
than specified in this Compact, or extend the Compact Term.
3. Consultative Process
    In order to develop a proposal for MCC Funding, the Government 
conducted a consultative process with the private sector and civil 
society that involved broad participation of the general public. The 
public was asked to identify the primary constraints to economic growth 
in Mongolia, as well as potential uses of MCC Funding to remove such 
constraints. Thereafter, Mongolia's National Council consulted 
Mongolia's national development plan and poverty reduction strategy 
papers and conducted additional targeted consultations with sector 
experts and stakeholders in order to shape the results of the public 
consultation into a proposal for MCC Funding. The Program consists of 
Projects designed to address the primary constraints to economic growth 
in Mongolia identified in these consultations.
4. Proposals
    MCA-Mongolia will arrange procurement of goods, works and services, 
as appropriate, to implement all Projects under the Compact. MCA-
Mongolia will engage a Procurement Agent who will act on its behalf to 
manage the acquisition of such goods, works and services. All 
procurements shall be conducted in accordance with the MCC Program 
Procurement Guidelines.
5. Environmental and Social Oversight, Monitoring and Capacity Building
    To ensure that environmental and social safeguards and mitigation 
measures are implemented for the Program by MCA-Mongolia, MCC Funding 
will be used to engage an environmental and social oversight consultant 
to enhance the capacity of MCA-Mongolia. This consultant will also work 
to enhance the capacity of the Ministry of Nature and Environment to 
enforce and implement the Government's environmental laws and 
regulations, to train staff, and identify whether additional staff are 
needed, to carry out effective environmental oversight and monitoring 
of the implementation of the Program.

B. Rail Project

1. Background
    Mongolia's rail system is the transportation backbone of the 
economy, contributing more to GDP than in any other country. The rail 
system moves 97 percent of the ton-kilometers of freight transport in 
Mongolia. The Ulaanbaatar Railway Joint Stock Company, in which the 
Government and the Government of the Russian Federation each own a 50 
percent interest (``UBTZ'') \2\, operates Mongolia's railway system. 
This system, with its antiquated infrastructure, equipment, and 
practices, cannot meet current demand for rail services and poses a 
serious economic bottleneck by limiting growth in domestic and foreign 
trade and associated investment, and contributing to inflation. The 
Rail Project addresses this bottleneck through improvements in the 
efficiency and capacity of the rail system, thereby creating new jobs 
in industries and businesses related to or served by the rail system.
---------------------------------------------------------------------------

    \2\ UBTZ is commonly referred to as ``MTZ.'' For the avoidance 
of doubt, the terms ``UBTZ'' and ``MTZ'' refer to the same legal 
entity.
---------------------------------------------------------------------------

2. Project
    The Rail Project consists of the following activities (each, a 
``Project Activity''):
    (a) Rail Sector Technical Assistance Activity.
    MCC Funding will be used to provide training and other technical 
assistance to UBTZ, the Mongolian Railway Authority (``MRA''), which is 
Mongolia's principal regulator of the rail sector, and certain other 
agencies, to improve their operational, management, maintenance, and 
regulatory practices. Specifically, MCC Funding will support:
    (i) Training of personnel at UBTZ as well as those from the private 
and public sectors involved in the rail sector of Mongolia in the 
technology, operation, management and maintenance of locomotives, 
wagons,

[[Page 61392]]

signaling and communication equipment and track, as well as in various 
aspects of railroad operations (including wagon fleet management, 
intermodal activities, sales and marketing, and financial management 
and accounting practices);
    (ii) Technical assistance to MRA to upgrade its capacity to 
regulate the rail sector and to strengthen its technical capacities in 
relevant areas such as rail safety, pricing, and track access 
licensing;
    (iii) Technical assistance to UBTZ in sustainability planning and 
remediation of accounting practices to adhere to IAS;
    (iv) Technical assistance to the Customs General Administration to 
strengthen its capacity to enforce and implement laws and regulations 
relevant to the rail sector and to transport of natural resources; and
    (v) Identification and management by MCA-Mongolia of environmental, 
social, health and safety impacts associated with the implementation of 
the Rail Project, consistent with section 2.6(c) of the Compact and the 
World Bank's Operational Policy on Involuntary Resettlement (OP 4.12).
    (b) LeaseCo Establishment Activity.
    MCC Funding will be used to assist in the formation of a company 
owned by the Government to own and lease various railway assets under 
the Rail Project (``LeaseCo''). Specifically, MCC Funding will support:
    (i) A regulatory review to determine the optimal method for the 
development, establishment, management and operation of LeaseCo;
    (ii) Assistance in establishing LeaseCo, including forming its 
board of directors, staffing its management unit, and funding certain 
other start-up costs;
    (iii) An outside project management firm who will work with MCA-
Mongolia and relevant ministries and agencies of the Government to 
prepare the scope of work and bidding documents for contracting a 
private sector firm to manage and operate LeaseCo (``OpCo''); and
    (iv) The oversight of OpCo by an outside project management firm 
together with MCA-Mongolia and relevant agencies and ministries of the 
Government to ensure effective management of LeaseCo for purposes of 
obtaining rail assets through MCC Funding for lease to UBTZ and other 
rail shippers and operators in Mongolia.
    (c) LeaseCo Operation Activity.
    MCC Funding will be used to assist LeaseCo in acquiring various 
railway-related assets to lease to UBTZ and to other rail shippers and 
operators in Mongolia. Specifically, MCC Funding will support:
    (i) The acquisition by LeaseCo of (1) up to approximately 30 
freight locomotives, (2) up to approximately 75 new open top freight 
wagons, (3) up to approximately 75 new specialized freight wagons, (4) 
track maintenance equipment, and (5) a modernized signaling and 
communications system for installation on the mainline track 
(collectively, the ``LeaseCo Assets''); and
    (ii) The services of OpCo in effectively arranging leases of the 
LeaseCo Assets to UBTZ and to other rail shippers and operators in 
Mongolia.
3. Beneficiaries
    The upgrading of the railway under the Rail Project is expected to 
facilitate development in both the project impact area and the nation 
at large. Potential clients of the upgraded railway include shippers of 
goods into and out of the area who benefit from lower transport costs 
(compared, for example, to the transport costs for trucks), businesses 
seeking new markets in, or goods from, the area, potential investors 
assessing opportunities in the area, and shippers from other regions 
and countries whose goods are transiting through the area. In addition, 
the Rail Project will increase the rail system's capacity to haul 
minerals to markets, thus leading to more jobs in mining and cargo-
handling. The overall direct effect on employment is expected to be 
approximately 21,000 additional jobs created over 20 years. Of these, 
5,300 jobs are expected to be at the low-or unskilled level, and over 
2,600 are targeted for the poor. More broadly, over 20 years, 
approximately 2,395,000 people are expected to benefit from increased 
economic activity attributable to the railway investment.
4. Donor Coordination
    The Rail Project builds upon the work of other donors to Mongolia. 
For instance, both the World Bank and the ADB have supported the 
Government in developing a comprehensive transport strategy. In 
addition, the International Finance Corporation recently completed a 
project to strengthen the regulatory structure for leasing in Mongolia 
while the European Bank for Reconstruction and Development assisted the 
Government with planning various developments in the transport sector. 
While no donor is currently working directly in the rail sector, during 
the implementation of the Rail Project, further collaboration with 
other donors is expected.
5. USAID
    USAID currently does not focus specifically on the rail sector in 
Mongolia. However, the Government expects to work with USAID, as 
appropriate, to identify potential opportunities for coordination with 
respect to the Rail Project.
6. Sustainability
    In order for the Rail Project to be sustainable, the Government 
will undertake certain policy, legal and regulatory reforms affecting 
the rail sector as further outlined in paragraph 7 below. In addition, 
to ensure the environmental and social sustainability of the Rail 
Project, the Government will cause MCA-Mongolia to engage in on-going 
public consultations in which various stakeholders in the Rail Project, 
including women and other vulnerable groups, are given the opportunity 
to participate during the development and implementation of the Rail 
Project. Finally, in light of the possible negative direct, induced, 
and transboundary impacts of the Rail Project (including: anticipated 
increases in extractive industries; illegal timber extraction 
originating from northern Mongolia and eastern Russia; and illegal 
trafficking in persons), the completion of an environmental and social 
impact assessment (that includes an EMP) will be a condition precedent 
to certain Disbursements for the acquisition by LeaseCo of certain 
equipment described in paragraph 2(c) of Part B of this Annex I of the 
Compact.
7. Policy, Legal, Regulatory and Other Reforms; Covenants
    (a) The implementation by the Government of the following policy, 
legal, regulatory and other reforms described below, satisfactory to 
MCC, shall be conditions precedent to certain Disbursements:
    (i) UBTZ shall commit to undertake continued track, bridge and 
culvert maintenance as well as annual track upgrades to R65 rails for 
approximately 35 km of track for each of 2007 and 2008 and 
approximately 50 km of track annually thereafter during the Compact 
Term, and UBTZ shall deliver to MCA-Mongolia annual reports on such 
maintenance and upgrades;
    (ii) UBTZ shall commit to making progress towards bringing its 
financial systems, books and records in line with IAS and to having its 
financial statements audited at certain intervals as agreed by the 
Parties during the Compact Term by a qualified international auditing 
firm in accordance with IAS; and
    (iii) UBTZ shall commit to lease newly acquired rail equipment from 
LeaseCo, to allow LeaseCo to lease such equipment to both UBTZ and 
other shippers at fair market rates, and to

[[Page 61393]]

allow such equipment to operate on UBTZ's tracks.
    (b) The Government shall ensure that all revenues received by 
LeaseCo (above a threshold amount agreed by the Parties) which are 
generated through use of the LeaseCo Assets shall, during the period of 
the Compact, be used solely for (i) maintenance and repair of the 
LeaseCo Assets, (ii) acquisition, maintenance and repair of additional 
rail-related assets from time to time, based on a sustainable LeaseCo 
business plan approved by MCC and (iii) other uses for which MCC has 
provided prior written approval.
    (c) The Government shall ensure that neither the LeaseCo Assets nor 
revenues generated thereby or assets purchased therewith are provided 
directly or indirectly to UBTZ or any other Government entity other 
than on arms-length, commercial terms approved by MCC.
    (d) The Government shall ensure that LeaseCo is not privatized and 
does not dispose of the LeaseCo Assets nor revenues generated thereby 
or assets purchased therewith during the Compact period, either in 
whole or in part, without MCC's prior written approval of the terms and 
conditions of such privatization or disposal.
    (e) The parties agree that LeaseCo is being created in order to 
contribute to the emergence of a commercially operated, competitive, 
and efficient rail system in Mongolia, and MCC relies on the 
Government's assurances that it intends to continue LeaseCo's 
operations beyond the Compact term, in accordance with the objectives 
and operating principles applicable to LeaseCo during the Compact term.

C. Property Rights Project

1. Background
    A steady stream of poor rural Mongolians are abandoning traditional 
nomadic herding practices and migrating to the cities in search of 
better lives. The bulk of these migrants are moving to Mongolia's three 
biggest cities--Ulaanbaatar, Erdenet and Darkhan--where they either 
settle in suburban ``ger areas'' or peri-urban rangeland areas. 
Mongolian law gives ger area residents the right to obtain ownership to 
the land upon which they live. However, the complexity and expense of 
the ownership process make it difficult for these people to become 
owners in fact and thus capture the full benefits of ownership. In 
peri-urban rangelands, Mongolia's tradition of open access pasture use, 
combined with the influx of migrants' herds, has led to overgrazing and 
triggered interest in new land-use regimes that will encourage 
investment, improved land use, and higher agricultural productivity. 
The Property Rights Project is expected to improve the accuracy and 
accessibility of the formal system for recognizing and transferring 
land rights and for issuing fully marketable private land titles to ger 
area residents. In addition, the Property Rights Project will introduce 
a system of leasing peri-urban rangelands to herder groups in lieu of 
open access, and provide key infrastructure and training so that they 
can improve livestock management, productivity and, ultimately, farm 
income.
2. Project
    The Property Rights Project consists of the following activities 
(each, a ``Project Activity''):
    (a) Improvement of the Land Privatization and Registration System 
Activity.
    MCC Funding will be used to improve the formal system of 
privatizing and registering land rights. Specifically, MCC Funding will 
support:
    (i) A commission of stakeholders and technical experts to study the 
obstacles that affect the ability of Mongolian citizens to privatize 
and register land efficiently and cost-effectively, to make 
recommendations on how to reduce such obstacles, and to work with 
Government agencies, the State Great Khural (Parliament), and non-
government specialists and interest groups to substantially implement 
the recommendations;
    (ii) Upgrade of the geospatial infrastructure necessary for 
accurate land parcel mapping, including provision of Continually 
Operating Reference Stations (CORS), supply of Global Positioning 
System (GPS) equipment to regional land offices, and training on the 
use of each;
    (iii) Capacity building for land offices, including creation and 
support of land market specialist positions to help citizens resolve 
issues related to land privatization and registration, and training of 
land office staff in land law, land mapping, use of satellite imagery, 
and processing of applications for privatization of ger area land 
plots;
    (iv) Upgrade of the State Registry's central office space, 
information technology platform and business processes, establishment 
of offices in at least four districts of Ulaanbaatar, and similar 
upgrades of State Registry offices in eight regional centers around the 
country; and
    (v) Identification and management of environmental, social, health 
and safety impacts associated with implementation of this Project 
Activity, consistent with section 2.6(c) of the Compact and the World 
Bank's Operational Policy on Involuntary Resettlement (OP 4.12).
    (b) Privatization & Registration of Ger Area Land Plots Activity.
    MCC Funding will be used to privatize and register approximately 
75,000 land plots in the ger areas of Ulaanbaatar and eight regional 
centers. Specifically, MCC Funding will support:
    (i) Provision of fully privatized and registered ownership rights 
to the land plots of low and middle income households;
    (ii) Identification of main utility corridors;
    (iii) Mapping of public land areas (parks, schools, public 
buildings, etc.) within the ger areas; and
    (iv) Identification and management of environmental, social, health 
and safety impacts associated with implementation of this Project 
Activity, consistent with Section 2.6(c) of the Compact and the World 
Bank's Operational Policy on Involuntary Resettlement (OP 4.12).
    (c) Peri-Urban Land Leasing Activity.
    MCC Funding will be used to identify and lease approximately 300 
serviced tracts of rangeland to herder groups in the peri-urban areas 
of Darkhan, Erdenet, and Ulaanbaatar. Specifically MCC Funding will 
support:
    (i) Production of maps for each peri-urban area showing the 
location of herders, the lands they use, and identifying suitable 
leasing sites;
    (ii) Installation of wells and supplying of materials for 
construction of fences and animal shelters on the suitable leasing 
sites;
    (iii) Selection of herder groups to receive leases to the tracts of 
rangeland (including wells, fences and animal shelters) through a 
public, transparent and fair process. These herder groups will sign 
lease contracts that include a requirement to make land use payments 
covering the private good component of the well, fence and animal 
shelter investment;
    (iv) Training of herder groups to improve their skills in range 
management, herd productivity, and business and marketing, including 
stock density management, monitoring rangeland carrying capacity, well 
operation and maintenance, capturing precipitation run-off, fodder/feed 
storage techniques, and business and marketing plans. Also, local land 
and agricultural officials will receive training on their related 
responsibilities; and
    (v) Identification and management of environmental, social, health 
and safety impacts associated with the implementation of this Project 
Activity,

[[Page 61394]]

consistent with section 2.6(c) of the Compact and the World Bank's 
Operational Policy on Involuntary Resettlement (OP 4.12).
3. Beneficiaries
    Approximately 75,000 households are expected to gain marketable 
title to their land plots in ger areas as a result of the Property 
Rights Project. People who are able to use a more accurate and user-
friendly registration system to document property purchases, sales and 
other economic transactions will benefit as well. Similarly, since 
banks will have better information about prospective borrowers, 
commercial lending should increase and borrowing costs should decrease. 
Some 300 herder groups (representing approximately 1,000 households) 
are expected to lease peri-urban rangelands, engage in better livestock 
production practices, and subsequently increase their incomes.
4. Donor Coordination
    The Property Rights Project builds upon a variety of other donor's 
efforts. Most notably, the Property Rights Project makes use of the 
results of ADB's ``Cadastral Survey and Land Registration Project'' 
that has mapped many land parcels slated for privatization and 
currently is developing a land information system to which the State 
Registry will supply information on legal rights to land. Moreover, the 
design of the Peri-Urban Land Leasing Activity is informed by, among 
others, past efforts of the United Nations Development Programme and 
the World Bank, and complements an ongoing project being implemented by 
the Government, the Japan International Cooperation Agency and the Food 
and Agriculture Organization to improve efficiencies in the dairy 
system.
5. USAID
    The Property Rights Project has drawn heavily from the experience 
of USAID's ``GER Initiative'' that is implementing a variety of 
economic development efforts in the ger areas of Mongolia's cities. In 
addition, lessons learned from USAID's ``Gobi Initiative,'' focused on 
enterprise development and improved incomes of families in and around 
the Gobi region, will inform the final design of the Peri-Urban Land 
Leasing Activity. Furthermore, the Government expects to work with 
USAID as appropriate to identify potential opportunities for 
coordination with respect to the Property Rights Project.
6. Sustainability
    As conditions precedent to certain Disbursements, the Government 
will be required to provide additional office space, and additional 
office sites, to the State Registry. The upgraded State Registry is 
expected to generate increased revenues to be used to support itself. A 
plan to ensure the sustainability of the State Registry will be 
produced and implemented so that Mongolia will have a secure system for 
recognizing and protecting real property rights over the long term. In 
addition, the various institutional reforms that the Property Rights 
Project should facilitate will make future privatizations easier. 
Regarding the Peri-Urban Land Leasing Activity, annual land lease 
payments to the Government are expected to support improved land 
management, extension and other services needed by the herder groups, 
and plans will be developed for management and maintenance of wells and 
other rangeland infrastructure supplied by the Property Rights Project. 
Related Disbursements will depend upon the prior development, with 
relevant stakeholder input, of selection criteria for herder groups 
that are eligible for leases under the Peri-Urban Land Leasing 
Activity.
    In order to ensure the environmental and social sustainability of 
the Property Rights Project as a whole, MCA-Mongolia will engage in 
regular public consultations through which various stakeholders 
(including women and other vulnerable groups) will have the opportunity 
to participate in the development and implementation of the Property 
Rights Project. In addition, a framework environmental assessment (that 
includes a social assessment) and an EMP will be completed prior to the 
commencement of (a) any upgrade of the various offices under the 
Improvement of the Land Privatization and Registration System Activity 
and (b) any construction activity under the Peri-Urban Land Leasing 
Activity.

D. Vocational Education Project

1. Background
    Mongolia's vocational education system has not evolved to serve the 
demands of a modern, private-sector led economy. The capacity of this 
system to teach core technical skills and provide critical labor 
information is weak, training equipment is limited and outdated, and 
instructors ill-prepared to teach. Essential public-private 
partnerships to ensure that students receive high quality, demand-
driven training are largely absent, and credentialing systems are 
substandard. As a result, Mongolia imports skilled labor from other 
markets, leaving high rates of unemployment among unskilled Mongolians, 
especially youth. The Vocational Education Project is designed to 
address this problem, specifically seeking to increase the wages of 
poor Mongolians by improving their technical skills and productivity to 
meet labor market demand in key industries (including, among others, 
construction, mining, electronics, mechanics, and transport). This will 
be done by (a) strengthening the institutional framework needed to 
support a demand-driven vocational education system, (b) defining 
industry-led skills training standards for occupations and translate 
these standards into a modern vocational education curricula supported 
by new instructional materials and equipment, (c) developing 30 new 
career preparation tracks, and (d) improving teacher training and 
professional development.
2. Activities
    The Vocational Education Project consists of the following 
activities (each, a ``Project Activity''):
    (a) Reforms to TVET Policy and Operational Framework Activity.
    MCC Funding will be used to strengthen the policy and operational 
framework, to create an efficient governance and standard-setting 
mechanism, and to secure private sector participation for technical and 
vocational education and training (``TVET''). Specifically, MCC Funding 
will support:
    (i) Legal and regulatory reforms that will create and allow the 
implementation of demand-driven TVET; and
    (ii) Establishment and support of the National Advisory Board for 
Vocational Education and Training (``NABVET'') to enable it to respond 
to labor market needs, to rationalize public funding, to set standards, 
and to coordinate quality assurance processes and formal course 
accreditation.
    (b) Creation of Skills Standards and Competencies System Activity.
    MCC Funding will be used to establish skills standards and a 
competency-based qualification training system based on nationally 
approved units of competency, modules and courses, and to install these 
innovations in training institutes. Specifically, MCC Funding will 
support:
    (i) Establishment of national TVET standards for short-term and 
long-term career training fields;
    (ii) Development of new, modern, curricula, courses, and 
instructional materials for short-term and long-term career training 
fields;
    (iii) Development of an assessment and credentialing system to 
support the

[[Page 61395]]

new standards and modernized TVET system;
    (iv) Improvement of the capacity of regional and national 
methodology centers to create and distribute materials and training 
resources to instructors in all types of TVET institutes; and
    (v) Strengthening the linkage between in-service and pre-service 
vocational-technical teacher training programs and improving the 
sustainability of the TVET teacher training system.
    (c) Competency-Based Training System Activity.
    MCC Funding will be used to implement the new competency-based 
training system in TVET schools. Specifically, MCC Funding will 
support:
    (i) Extension of training to approximately 1,500 vocational 
teachers and administrators in Mongolia's approximately 75 training 
centers (consisting of approximately 35 Vocational Training and 
Production Centers under the Ministry of Education, Culture and Science 
and approximately 40 work development centers under the Ministry of 
Social Welfare and Labour);
    (ii) Provision of equipment and materials needed to deliver the new 
curriculum being developed for short-term and long-term career training 
fields as part of the Creation of Skills Standards and Competencies 
System Activity; and
    (iii) Identification and management of environmental, social, 
health and safety impacts associated with the implementation of this 
activity, consistent with Section 2.6(c) of the Compact and the World 
Bank's Operational Policy on Involuntary Resettlement (OP 4.12).
    (d) Career Guidance System Activity.
    MCC Funding will be used to provide career guidance and employment 
information services to Mongolians. Specifically, MCC Funding will 
support:
    (i) Installation of employment information services in eight 
regional methodological centers; and
    (ii) Establishment of a career guidance service and web-based 
career information system.
3. Beneficiaries
    The TVET Project is expected to almost double the enrollment of 
long-term students in approximately 35 training centers from the 
current enrollment of approximately 24,700 students to more than 40,000 
students. Enrollment in short-term training courses is also expected to 
significantly increase. The Vocational Education Project is expected to 
improve the quality of, and to expand access to, TVET. Over the next 20 
years, the TVET Project is expected to improve the wage and employment 
prospects of approximately 170,000 TVET graduates. For these graduates, 
improved training is anticipated to lead to a starting wage on average 
5 percent greater than current starting wages.
4. Donor Coordination; Role of Private Sector and Civil Society
    The project will be implemented in coordination with several on-
going projects by other donors, including ADB's ``Third Education 
Development Project'' that seeks, among others, to reform the TVET 
system, a project funded by the Japan Fund for Poverty Reduction for 
the promotion of non-formal construction worker skills training for 
vunerable youth and poor adults, Gesellschaft f[uuml]r Technische 
Zusammenarbeit's ``Urban Development, Construction Sector and VET 
Promotion Program,'' as well as its projects on small and medium 
enterprises promotion.
5. USAID
    Currently USAID does not fund projects addressed at reforming the 
vocational education system. However, the Government will seek future 
opportunities to collaborate with USAID on vocational education system 
issues if such funding is made available.
6. Sustainability
    To ensure the sustainability of the Vocational Education Project, 
the Parties have agreed to the policy, legal and regulatory reforms 
outlined in paragraph 7 below, which are expected to improve TVET 
institutes' income-generating capacity which, in turn, is expected to 
lead to increased funding support for TVET institutes. To ensure the 
environmental and social sustainability of the Vocational Education 
Project as a whole, the Government shall cause MCA-Mongolia to engage 
in on-going public consultations with various stakeholders (including 
women and other vulnerable groups) to participate in the development 
and implementation of the Vocational Education Project. In addition, 
MCA-Mongolia will be required to develop a framework EMP, including 
health and safety guidelines for use in the TVET institutes in the 
program.
7. Policy, Legal and Regulatory Reforms
    (a) Prior to Disbursements for any activity other than the four (4) 
sub-activities listed below, MCA-Mongolia has developed, satisfactory 
to MCC, a legal and policy framework to support a modern, labor market 
driven TVET system, including:
    (i) Establishment of NABVET, with half of the members representing, 
and selected by, the private and non-governmental sectors, and with the 
other half of the members representing the public sector, as appointed 
by applicable law;
    (ii) Fostering revenue generation and entrepreneurial capacities 
through, for example, the sale of products and services provided by 
vocational education institutes;
    (iii) Harmonizing all public funding for the TVET sector; and
    (iv) Passage of legislation to maintain or increase the level of 
funding for the TVET sector as of the date the Compact is signed each 
year during the Compact period.
    (b) The Government shall ensure that no TVET institution benefiting 
from MCC Funding is privatized during the Compact term, either in whole 
or in part, without MCC's prior written approval of the terms and 
conditions of such privatization.

E. Health Project

1. Background
    Mongolia has rapidly increasing rates of NCDIs, including 
cardiovascular disease, diabetes, cancers and injury-induced trauma. 
Mongolia's mortality and morbidity rates from cardiovascular disease 
and cancers greatly exceed those of Western countries and now represent 
the major cause of death and disability, particularly in younger age 
groups (i.e., 35 to 55 years of age). Trauma response and emergency 
medicine are under-developed. At the same time, current NCDI programs 
in Mongolia are treatment based, with inadequate attention to cost-
effective NCDI prevention, early detection, where relevant, and disease 
management. This has a negative impact on the productivity of the labor 
force, which is disproportionately affected by NCDIs, and is a 
significant drain on scarce public health investments. The Health 
Project focuses on extending the productive years and productivity of 
the labor force by reducing the incidence and severity of NCDIs such as 
cancer, cardiovascular disease, diabetes and preventable accidents and 
trauma, and reducing and refocusing total health expenditure.
2. Project
    The Health Project consists of the following activities (each, a 
``Project Activity''):
    (a) NCDI Capacity Building Activity.
    MCC Funding will be used to ensure that the program is built on 
best

[[Page 61396]]

international experience with NCDI. Specifically, MCC Funding will 
support:
    (i) Establishment of senior NCDI advisory boards and expert panels;
    (ii) Assessment of current NCDI practices, personnel, equipment and 
supplies, and review of relevant protocols, guidelines, and job 
descriptions for NCDI detection, management and treatment;
    (iii) Competitive selection of the aimags and districts where the 
Health Project will be initially implemented;
    (iv) Provision of two mammography machines, vehicles and other NCDI 
equipment and supplies;
    (v) Testing the impact of the Health Project using total quality 
assurance practices; and
    (vi) Finalization of baseline data and indicators for monitoring 
and evaluation of the Health Project.
    (b) NCDI Prevention Activity.
    MCC Funding will be used to reduce factors for NCDIs through such 
behavior change communications as public awareness campaigns and 
education outreach. Specifically, MCC Funding will support:
    (i) Development of national and regional NCDI communications 
campaigns, such as mass media, health fairs, work sites and mobile 
units promoting healthy lifestyles; and
    (ii) Development and implementation of interventions to promote 
behavior change among youth and high risk individuals to prevent NCDIs.
    (c) NCDI Early Detection Activity.
    MCC Funding will be used to mobilize client demand for screening, 
introduce modern cost-effective procedures, and provide key equipment. 
Specifically, MCC Funding will support:
    (i) Implementation of new NCDI screening procedures in selected 
sites;
    (ii) Improvement of cervical cancer screening methodologies;
    (iii) Operations research on feasibility of cervical cancer 
immunization;
    (iv) Improvement of breast cancer detection methodologies; and
    (v) Identification and management of environmental, social, health, 
and safety impacts associated with the implementation of this activity, 
consistent with section 2.6(c) of the Compact and the World Bank's 
Operational Policy on Involuntary Resettlement (OP 4.12).
    (d) NCDI Management Activity.
    MCC Funding will be used to improve the protocols and update 
training for medical professionals. Specifically, MCC Funding will 
support:
    (i) Development of community-based disease management program and 
systems; and
    (ii) Implementation of new NCDI management services in selected 
sites.
3. Beneficiaries
    The Health Project targets approximately 60 percent of the 
Mongolian adult population for community-level communications for 
behavioral change, early detection and disease management activities. 
This will lead to extended productive years and productivity of the 
labor force and decreased health expenditures by households on NCDIs in 
the target population. In addition, the entire population is expected 
to benefit from changes in school curriculum and mass education 
campaigns. Specifically, the beneficiaries are expected to include 
approximately 43 to 45 percent of the adult population nationwide who 
will have increased access to early detection of hypertension, elevated 
cardiovascular disease risks, and diabetes risks. Other beneficiaries 
include the approximately 60 percent of adult women who will have 
access to early detection of breast and cervical cancer, healthcare 
professionals in selected counties and districts who will receive 
specially-designed NCDI training, and secondary school students who 
will be made aware of health-promoting choices early in life.
4. Donor Coordination; Role of Private Sector and Civil Society
    The Health Project will complement the activities of other donors 
in the health sector, including ADB, Japanese International Corps of 
Welfare Services and the World Health Organization (``WHO'') that, once 
having focused on child health and communicable diseases in the past, 
are increasingly including general support for NCDIs in their programs. 
Specifically, the Health Project will build upon WHO's laboratory 
specimen transport system and ADB's physician training, as well as the 
University of Toronto's research on cervical cancer diagnosis.
    While the majority of care within Mongolia for chronic NCDIs 
(including cancers and cardiovascular diseases) takes place in the 
public sector, the nascent private sector for health care is growing. 
For this reason, consultations have taken place with a private hospital 
association and various physician groups in the design of the Health 
Project. Civil society's role is expected to be vital as community-
level mobilization and motivation for behavioral changes are explored 
and implemented under the Health Project.
5. USAID
    Currently USAID does not fund any health-related projects in 
Mongolia. However, the Government will seek future opportunities to 
collaborate with USAID on NCDI issues if health funding is made 
available.
6. Sustainability
    In order to enhance sustainability, the Health Project includes the 
NCDI Capacity Building Activity from its start-up phase. Since changing 
attitudes and practices of health providers and managers is a critical 
component to the Health Project's success, the NCDI Capacity Building 
Activity is expected to build conviction among the Mongolian medical 
practitioners and clients of the effectiveness of the new interventions 
under the Health Project. The Health Project initiates preventive and 
promotive health services requiring additional funding and recurrent 
costs (including funding for client medications and procedures for the 
very poor). The Government will commit to financing these additional 
costs as further described in paragraph 7 below.
    In order to ensure the environmental and social sustainability of 
the Health Project as a whole, the Government will cause MCA-Mongolia 
to engage in on-going public consultations in which various 
stakeholders in the Health Project (including women and other 
vulnerable groups) are given the opportunity to participate during the 
implementation of the Health Project. In addition, during the 
development and implementation of the Health Project, a plan for safe 
and proper use of diagnostic equipment will be developed and used. A 
framework EMP will be developed for addressing health and safety issues 
and for assessing compliance with existing waste management regulations 
in all project related services and facilities. The EMP will include 
procedures for support of remedial actions to insure compliance with 
the MCC Environmental Guidelines, environmental regulations and access 
needs for all potential beneficiaries.
7. Policy, Legal and Regulatory Reforms
    The implementation by the Government of the policy, legal and 
regulatory reforms described below, satisfactory to MCC, shall be 
conditions precedent to certain Disbursements.
    (a) The Government shall have committed to funding the recurrent 
costs of the NCDI program following the expiration of the Compact Term.
    (b) The Government shall have committed to taking necessary steps 
to ensure that the recurrent costs for screening and disease management 
activities for low-income people are covered by the Government 
following the expiration of the Compact Term.

[[Page 61397]]

F. Implementation

    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 shall enter into the Program Implementation Agreement, 
and any other agreements in furtherance of this Compact, all of which, 
together with this Compact, shall set out certain rights, 
responsibilities, duties and other terms relating to the implementation 
of the Program.
1. MCC
    MCC shall take all appropriate actions to carry out each of its 
responsibilities in connection with this Compact and the Program 
Implementation Agreement, including the exercise of its approval rights 
in connection with the implementation of this Compact and the Program.
2. Governance
    (a) Establishment of MCA-Mongolia. Under this Compact, the 
Government hereby establishes an independent legal entity empowered to 
carry out the Government's obligations and to implement the Program 
under this Compact and the Program Implementation Agreement (``MCA-
Mongolia''). The Government shall ensure that MCA-Mongolia take all 
appropriate actions to implement the Program, including the performance 
of the rights and responsibilities designated to it by the Government 
pursuant to this Compact and the Program Implementation Agreement. In 
addition, operations of MCA-Mongolia shall be subject to any other 
limitations MCC may require from time to time.
    (i) Board of Directors. MCA-Mongolia shall be governed by a board 
of directors (the ``Board'') that will have final decision making 
authority over the implementation of the Program. The Board shall 
consist of:
    (1) Nine voting members:
    (A) Prime Minister, as chairman of the Board;
    (B) Minister of Finance;
    (C) Minister of Roads, Transportation and Tourism;
    (D) Minister of Education, Culture and Science;
    (E) Minister of Health;
    (F) Minister of Construction and Urban Development;
    (G) One representative selected by the private sector;
    (H) Two representatives selected by civil society; and
    (2) Nine non-voting members:
    (A) MCC observer;
    (B) MCA-Mongolia chief executive officer;
    (C) MCA-Mongolia general counsel;
    (D) State Secretary from Ministry of Social Welfare and Labour;
    (E) State Secretary from Ministry of Food and Agriculture;
    (F) One representative selected from the private sector who will 
be, after his/her term as non-voting member, the voting member from the 
private sector; and
    (G) Three representatives selected from civil society, of which, 
one will be an environmental observer and two will become, after their 
terms as non-voting members, voting members.
    (ii) Technical Secretariat. A technical secretariat (the 
``Technical Secretariat'') shall support the Board in the 
implementation of the Program. A chief executive officer will manage 
the day-to-day activities of MCA-Mongolia and will be supported by: (1) 
A chief operating officer, (2) a chief financial officer, (3) a general 
counsel, (4) a procurement officer, (5) an environmental and social 
assessment officer, (6) a monitoring and evaluation officer, (7) a rail 
project director, (8) a peri-urban rangeland director, (9) an urban 
property rights director, (10) a vocational education project director, 
and (11) a health director, and such other officers as may be agreed 
upon by the Government and MCC. The officers shall be supported by 
appropriate administrative personnel.
    (iii) Ethics Disclosures. All voting members of the Board and the 
officers of the Technical Secretariat set forth in clause (ii) above 
shall be required to provide, in advance of assuming their respective 
positions and annually at such times as are required by Mongolia's 
Anti-Corruption Law, the financial and other disclosures required by 
such law. This obligation shall apply whether or not such law would, 
absent this provision, require such disclosure.
    (b) Designation of MCA-Mongolia. The Government hereby designates 
MCA-Mongolia to implement all of the Government's obligations and to 
exercise all of the rights of the Government under this Compact and the 
Program Implementation Agreement. The Government acknowledges that such 
a designation does not relieve the Government of any of its obligations 
and rights under this Compact and the Program Implementation Agreement, 
for which the Government retains full responsibility.
    (c) MCA-Mongolia Operations. The day-to-day operations of MCA-
Mongolia shall be governed by MCA-Mongolia's bylaws, certificate of 
registration and internal regulations, which shall address, among other 
things, terms and conditions of employment at MCA-Mongolia.
    (d) Nature of MCA-Mongolia. The Government acknowledges that:
    (i) MCA-Mongolia is neither a Mongolian ``government entity'' nor a 
Mongolian ``non-governmental entity'' under the laws of Mongolia, and, 
as such, the laws of Mongolia regulating Mongolian government and non-
governmental entities do not apply to MCA-Mongolia; and
    (ii) as an independent legal entity established by the Government, 
any and all obligations of MCA-Mongolia in connection with this Compact 
are binding on the Government and may be carried out by the Government 
in the furtherance of the Compact.
    (e) Stakeholders' Committee. The Government shall ensure a 
stakeholders committee (the ``Stakeholders' Committee'') is formed and 
approved by MCC, to continue the consultative process throughout the 
implementation of the Program by having the Stakeholders' Committee 
provide recommendations to the Board and the Technical Secretariat 
regarding issues, concerns and inputs arising from the implementation 
of the Program. Private sector members of the Stakeholders' Committee 
will be selected initially by private sector members of the National 
Council, and civil society members will be selected initially by the 
civil society members of the National Council.
    (f) Effectiveness. This paragraph 2 of Part F of Annex I of the 
Compact shall be in effect from the date of execution of this Compact 
by the Parties without regard to the requirements for entry into force 
provided in Section 7.3 of the Compact.
3. Banking Services, Fiscal Management and Procurement
    (a) The Government shall ensure that a bank (the ``Bank'') is 
appointed, and the Permitted Accounts are established and banking 
services provided, in accordance with the terms of this Compact and the 
Program Implementation Agreement. The Bank will provide a broad range 
of banking services required by MCA-Mongolia to implement the Program. 
The Government shall take all appropriate actions to ensure that the 
Bank performs these services in accordance with the terms of this 
Compact, the Program Implementation Agreement and any other agreements 
to which the Bank is a party. The Government shall set out the roles 
and responsibilities of the Bank in one or more agreements to be

[[Page 61398]]

entered into between MCA-Mongolia and the Bank.
    (b) The Government shall ensure that a fiscal agent (the ``Fiscal 
Agent'') is appointed in accordance with the terms of this Compact and 
the Program Implementation Agreement. The Fiscal Agent will provide a 
broad range of financial management services required by MCA-Mongolia 
to implement the Program. The Government shall take all appropriate 
actions to ensure that the Fiscal Agent performs these services in 
accordance with the terms of this Compact, the Program Implementation 
Agreement and any other agreements to which the Fiscal Agent is a party 
and that all accounting in connection with the Program is in accordance 
with IAS. The Government shall set out the roles and responsibilities 
of the Fiscal Agent in one or more agreements to be entered into 
between MCA-Mongolia and the Fiscal Agent.
    (c) The Government shall ensure that a procurement agent (the 
``Procurement Agent'') is appointed in accordance with the terms of 
this Compact and the Program Implementation Agreement. The Procurement 
Agent will provide specified procurement activities required by MCA-
Mongolia to implement the Program. The Government shall take all 
appropriate actions to ensure that the Procurement Agent performs these 
services in accordance with the terms of this Compact, the Program 
Implementation Agreement and any other agreements to which the 
Procurement Agent is a party and in accordance with the MCC Program 
Procurement Guidelines. The Government shall set out the roles and 
responsibilities of the Procurement Agent in one or more agreements to 
be entered into between MCA-Mongolia and the Procurement Agent.
4. Project Implementation
    Except as otherwise agreed between the Parties, the Program will be 
implemented as follows:
    (a) Rail Project implementation will be overseen by an outside 
project management firm.
    (b) For the Property Rights Project, the Improvement of the Land 
Privatization and Registration System Activity and the Privatization & 
Registration of Ger Area Land Plots Activity will be implemented by a 
project implementation unit housed within the Ministry of Construction 
and Urban Development. The Peri-Urban Land Leasing Activity will be 
implemented by a project implementation unit housed within the Ministry 
of Food and Agriculture.
    (c) The Vocational Education Project will be implemented by a 
program implementation unit housed within the Ministry of Education, 
Culture and Science.
    (d) The Health Project will be implemented by a program 
implementation unit housed within the Ministry of Health.
    (e) Each relevant project implementation unit housed within a 
ministry of the Government will function in accordance with the 
applicable terms of the Program Implementation Agreement. The terms and 
conditions of employment, including remuneration and grounds for 
renewal or dismissal, shall be according to the terms of the applicable 
employment agreements and the labor policies specific to such project 
implementation unit. The staff of each such project implementation unit 
will be selected competitively without discrimination based on 
nationality or gender.

Annex II Summary of Multi-Year Financial Plan

    This Annex II to the Compact summarizes the multi-year financial 
plan for the Program.

1. General

    The multi-year financial plan summary below sets forth the 
estimated annual contribution of MCC Funding for administration, 
monitoring and evaluation, and implementation of the Program. The 
Government's contribution of resources will consist of ``in-kind'' and 
other contributions or amounts required to satisfy effectively the 
requirements of section 2.5(a) of this Compact. In accordance with the 
Program Implementation Agreement, the Government shall develop and 
adopt, on a quarterly basis, a detailed financial plan, approved by 
MCC, setting forth annual and quarterly funding requirements for the 
Program, projected both on a commitment and cash requirement basis.

2. Modifications

    To preserve flexibility, the Parties may by written agreement (or 
as otherwise provided in the Program Implementation Agreement), without 
amending this Compact, change the designations and allocations of funds 
among the Projects, the Project Activities, or any component under 
Program administration or monitoring and evaluation, or between a 
Project identified as of entry into force of the Compact and a new 
project; provided, however, that any such change (a) is consistent with 
the Compact Goal, and Project Objectives, and the Program 
Implementation Agreement, (b) does not materially adversely affect the 
applicable Project or any component 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.

[[Page 61399]]



                                                            Multi-Year Financial Plan Summary
--------------------------------------------------------------------------------------------------------------------------------------------------------
                           Project                                 CIF         Year 1       Year 2       Year 3       Year 4       Year 5       Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Rail Project:
    (a) Rail Sector Technical Assistance Activity............            0    7,913,500    4,444,500    2,920,000    2,770,000    1,970,000   20,018,000
    (b) LeaseCo Establishment Activity.......................            0    1,010,000      280,000      280,000      290,000            0    1,860,000
    (c) LeaseCo Operation Activity...........................            0   16,500,000   38,720,000   48,420,000   57,820,000      810,000  162,270,000
    (d) Project Administration Costs (RPM)...................            0      634,500    1,057,500    1,057,500    1,057,500      423,000    4,230,000
                                                              ------------------------------------------------------------------------------------------
    Subtotal.................................................            0   26,058,000   44,502,000   52,677,500   61,937,500    3,203,000  188,378,000
2. Property Rights Project:
    (a) Land Registration System Activity....................            0    1,325,375    4,746,458    3,812,250    2,592,430      223,100   12,699,613
    (b) Privatization of Ger Area Land Plots Activity........            0      201,250      682,813      625,313      510,314      510,314    2,530,004
    (c) Peri-Urban Land Leasing Activity.....................            0    1,092,500    2,406,375    2,285,625       43,125       43,125    5,870,750
    (d) Project Administration Costs.........................      172,200      374,100      341,436      352,651      364,259      357,273    1,961,919
                                                              ------------------------------------------------------------------------------------------
    Subtotal.................................................      172,200    2,993,225    8,177,082    7,075,839    3,510,128    1,133,812   23,062,286
3. Vocational Education Project:
    (a) TVET National Framework Activity.....................      100,000      200,000      200,000            0            0            0      500,000
    (b) Industry-Led Skills Standards System Activity........            0      500,000    2,500,000    3,000,000    2,000,000      200,000    8,200,000
    (c) Competency-Based Training System Activity............            0      800,000    5,000,000    5,000,000    3,000,000      500,000   14,300,000
    (d) Career Guidance System Activity......................            0      250,000      300,000      100,000      100,000      100,000      850,000
    (e) Project Administration Costs.........................      126,600      343,800      286,998      296,518      306,371      302,569    1,662,856
                                                              ------------------------------------------------------------------------------------------
    Subtotal.................................................      226,600    2,093,800    8,286,998    8,396,518    5,406,371    1,102,569   25,512,856
4. Health Project:
    (a) NCDI Capacity Building Activity......................       75,000      325,000    1,900,000    2,300,000    1,000,000      997,000    6,597,000
    (b) NCDI Prevention Activity.............................            0      400,000      800,000    1,100,000    1,200,000    1,090,000    4,590,000
    (c) NCDI Early Detection Activity........................            0      500,000      600,000      700,375      258,000      250,000    2,308,375
    (d) NCDI Management Activity.............................            0      800,000      900,000      250,000      250,000      173,000    2,373,000
    (e) Project Administration Costs.........................      111,500      216,000      201,300      207,821      214,569      207,554    1,158,744
                                                              ------------------------------------------------------------------------------------------
    Subtotal.................................................      186,500    2,241,000    4,401,300    4,558,196    2,922,569    2,717,554   17,027,119
5. Monitoring and Evaluation:
    Monitoring and Evaluation................................       40,250      562,350      471,500      469,200      385,250    2,768,050    4,696,600
                                                              ------------------------------------------------------------------------------------------
    Subtotal.................................................       40,250      562,350      471,500      469,200      385,250    2,768,050    4,696,600
6. Program Administration and Audits:
    (a) Program Administration (MCA-M).......................      741,133    1,677,533    1,265,720    1,185,579    1,056,132    1,063,405    6,989,502
    (b) Fiscal Agent.........................................    1,800,000    1,340,000    1,340,000    1,340,000    1,340,000    1,340,000    8,500,000
    (c) Procurement Agent....................................    1,700,000    1,300,000    1,300,000    1,200,000    1,000,000    1,000,000    7,500,000
    (d) Audit................................................      156,000      234,000      350,000      350,000      350,000      390,000    1,830,000
    (e) Environment & Social Oversight Consultant............            0      620,000      350,000      245,000      100,000      100,000    1,415,000
                                                              ------------------------------------------------------------------------------------------
        Subtotal.............................................    4,397,133    5,171,533    4,605,720    4,320,579    3,846,132    3,893,405   26,234,502
                                                              ==========================================================================================
            Total Estimated MCC Contribution.................    5,022,683   39,119,908   70,444,600   77,497,832   78,007,950   14,818,390  284,911,363
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 61400]]

Annex III Summary of Monitoring and Evaluation Plan

    This Annex III to the Compact summarizes the components of the plan 
to measure and evaluate progress toward achievement of the Compact Goal 
and the Project Objectives (``M&E Plan'').

1. Overview

    MCC and the Government shall formulate and agree to, and the 
Government shall implement or cause to be implemented, the M&E Plan 
that specifies (a) how progress toward the Compact Goal, Project 
Objectives and the intermediate results of each Project and Project 
Activity set forth in this Annex III ( ``Outcomes'') will be monitored 
(``Monitoring Component''), (b) a methodology, process and timeline for 
the evaluation of planned, ongoing, or completed Projects and Project 
Activities to determine their efficiency, effectiveness, impact and 
sustainability (``Evaluation Component'') and (c) other components of 
the M&E Plan described below.
    Information regarding the Program's performance, including the M&E 
Plan, and any amendments or modifications thereto, as well as 
periodically generated reports, shall be made publicly available on 
MCA-Mongolia's Web site and elsewhere. The Compact Goal, Project 
Objectives and Outcomes can be summarized as follows:
[GRAPHIC] [TIFF OMITTED] TN30OC07.000

2. Monitoring Component

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

                                                 Goal Indicators
----------------------------------------------------------------------------------------------------------------
          Indicator                    Baseline                  Year 5 target              Year 10 target
----------------------------------------------------------------------------------------------------------------
Increase in GDP due to        US$3.19 billion...........  US$4.63 billion...........  US$5.97 billion.
 Program \3\.

[[Page 61401]]

 
Poverty Headcount \4\.......  19.1%.....................  18.4%.....................  17.5%.
----------------------------------------------------------------------------------------------------------------


                                            Indicators.--Rail Project
----------------------------------------------------------------------------------------------------------------
                                                              Definition of
      Objective-level  result       Objective  indicator        indicator           Baseline      Year 5 target
----------------------------------------------------------------------------------------------------------------
Creation of new jobs and increased  Increase in GDP due   Incremental level of                0               62
 firm profitability.                 to rail               GDP due to
                                     improvements.         transport cost
                                                           savings (2007 US$
                                                           millions) \5\.
----------------------------------------------------------------------------------------------------------------
Increased economic activity via     Freight turnover      Freight mass                    9,219           22,301
 rail network.                       (million ton-km).     multiplied by
                                                           distance
                                                           transported,
                                                           includes shipping
                                                           by all rail
                                                           operators in
                                                           Mongolia \6\.
                                    Mine traffic          Domestic plus export            6,684           16,156
                                     (thousand metric      traffic of coal and
                                     tons).                other minerals.
----------------------------------------------------------------------------------------------------------------
       Outcome-level result           Outcome indicator       Definition of         Baseline      Year 5 target
                                                                indicator
----------------------------------------------------------------------------------------------------------------
Private sector involvement in the   Percent of wagons     Percent of MCC                      0              10%
 rail sector.                        leased by private     financed wagons
                                     firms.                leased by private
                                                           firms.
Increased shipping efficiency.....  Railway operating     Operating Expense /                95               87
                                     ratio.                Operating Revenue.
                                    Customer              Customer                          TBD              TBD
                                     satisfaction.         satisfaction as
                                                           determined by
                                                           survey of rail
                                                           customers \7\.
                                    Wagon time to         Number of days from               5.2              5.0
                                     destination (days).   the time a wagon
                                                           starts loading
                                                           until the time it
                                                           starts loading
                                                           again. This is a
                                                           monthly average of
                                                           all operating and
                                                           operable wagons in
                                                           the fleet.
----------------------------------------------------------------------------------------------------------------
Increased capacity................  Average locomotive    Numerator:                         50               76
                                     availability (%).     Locomotives at rail
                                                           operator's disposal
                                                           minus locomotives
                                                           in repair
                                                           Denominator:
                                                           Locomotives at rail
                                                           operator's disposal.
----------------------------------------------------------------------------------------------------------------


                                      Indicators.--Property Rights Project
 [Improvement of Land Privatization and Registration System Activity & Privatization & Registration of Ger Area
                                              Land Plots Activity]
----------------------------------------------------------------------------------------------------------------
                                                              Definition of
      Objective-level  result       Objective  indicator        indicator           Baseline      Year 5 target
----------------------------------------------------------------------------------------------------------------
Increased capitalization of land    Immovable property    Average sales price              7.28             8.23
 assets.                             value of hashaa       of hashaa plot per              2.44             2.62
                                     plots (2007 US$/sq.   square meter in
                                     meter).               Ulaanbaatar.
                                                          Average sales price
                                                           of hashaa plot per
                                                           square meter in
                                                           target communities
                                                           outside Ulaanbaatar
                                                           \8\.
                                    Households accessing  Number of hashaa                6,400           23,400
                                     bank credit.          plot owners in
                                                           Ulaanbaatar who are
                                                           using their hashaa
                                                           plots as
                                                           collateral\9\.
----------------------------------------------------------------------------------------------------------------
        Output-level result         Output indicator....  Definition of                Baseline    Year 5 target
                                                           indicator.
----------------------------------------------------------------------------------------------------------------
Increased land right formalization  Hashaa plots          Cumulative number of                0           75,000
                                     directly registered   hashaa plots
                                     by the Property       registered by
                                     Rights Project.       contractors of MCA-
                                                           Mongolia.
----------------------------------------------------------------------------------------------------------------


[[Page 61402]]


                                      Indicators.--Property Rights Project
                                       [Peri-Urban Land Leasing Activity]
----------------------------------------------------------------------------------------------------------------
                                                              Definition of
      Objective-level  result       Objective  indicator        indicator           Baseline      Year 5 target
----------------------------------------------------------------------------------------------------------------
Increased herder household income.  Income of herder      Net income of herder         US$4,650         US$5,330
                                     households on long-   households on long-
                                     term lease land.      term lease land
                                                           measured by total
                                                           consumption (2007
                                                           US$) \10\.
Increased peri-urban herder         Herd mortality rate.  Annual mortality                  5.6              4.5
 productivity.                                             rate of cattle.
                                    Liters of milk per    Annual average                    260            1,050
                                     cow.                  liters of milk per
                                                           cow on semi-
                                                           intensive project
                                                           farms.
                                                          Annual average                    260            1,950
                                                           liters of milk per
                                                           cow on intensive
                                                           project farms.
----------------------------------------------------------------------------------------------------------------
       Outcome-level result           Outcome indicator       Definition of         Baseline      Year 5 target
                                                                indicator
----------------------------------------------------------------------------------------------------------------
Optimize peri-urban rangeland       Number of herder      Number of                           0               40
 carry capacity and range            groups adopting       settlements meeting
 management.                         intensive farm        the following
                                     management            criteria: (i) sheep
                                     techniques.           units per 100 ha of
                                                           pasture is +/-20%
                                                           of recommended
                                                           carrying capacity
                                                           for intensive farm,
                                                           (ii) livestock is
                                                           predominately
                                                           (75%+) cows, and
                                                           (iii) hay stored at
                                                           beginning of winter
                                                           season is at least
                                                           180 days of dairy
                                                           herd requirement.
                                    Number of herder      Number of                           0              260
                                     groups adopting       settlements meeting
                                     semi-intensive farm   the following
                                     management            criteria: (i) sheep
                                     techniques.           units per 100 ha of
                                                           pasture is +/-20%
                                                           of recommended
                                                           carrying capacity
                                                           for semi-intensive
                                                           farm, and (ii) hay
                                                           stored at beginning
                                                           of winter season is
                                                           at least 30 days of
                                                           dairy herd
                                                           requirement.
----------------------------------------------------------------------------------------------------------------


                                    Indicators.--Vocational Education Project
----------------------------------------------------------------------------------------------------------------
                                                              Definition of
      Objective-level  result       Objective  indicator        indicator           Baseline      Year 5 target
----------------------------------------------------------------------------------------------------------------
Increased Income..................  Annual salary (2007   Average annual                  1,237              +5%
                                     US$).                 salary of employed
                                                           graduates who
                                                           completed new
                                                           curriculum one year
                                                           after graduation
                                                           (targets are
                                                           percent increase
                                                           over Year 3 level
                                                           when a new baseline
                                                           will be taken) \11\.
Increased Employment..............  Rate of employment..  Employment rate of                71%              +2%
                                                           graduates who
                                                           completed new
                                                           curriculum one year
                                                           after graduation
                                                           (targets are
                                                           percent increase
                                                           over Year 3 level
                                                           when a new baseline
                                                           will be taken) \12\.
----------------------------------------------------------------------------------------------------------------
       Outcome-level result           Outcome indicator       Definition of         Baseline      Year 5 target
                                                                indicator
----------------------------------------------------------------------------------------------------------------
Improved quality and relevancy of   Non-governmental      Percentage of non-                 1%              12%
 TVET system.                        funding of            governmental
                                     vocational            funding out of all
                                     education.            funding for the
                                                           Ministry of
                                                           Education, Culture
                                                           and Science and the
                                                           Ministry of Social
                                                           Welfare and Labour
                                                           vocational
                                                           education
                                                           institutions.
                                    Students completing   Number of students                  0           10,600
                                     newly designed long-  who successfully
                                     term programs.        receive
                                                           certification from
                                                           newly designed long-
                                                           term programs
                                                           (annual).
                                    Certified vocational  Percent of total                   0%              80%
                                     education teachers.   teaching staff
                                                           which has
                                                           successfully
                                                           completed the
                                                           certification exam.
----------------------------------------------------------------------------------------------------------------

[[Page 61403]]

 
       Outcome-level result           Outcome indicator       Definition of         Baseline      Year 5 target
                                                                indicator
----------------------------------------------------------------------------------------------------------------
 Improved quality and relevance of  Percent of active     Percent of active                  0%             100%
           TVET system.              teachers receiving    teachers receiving
                                     certification         certification
                                     training.             training regardless
                                                           of pass/fail status.
----------------------------------------------------------------------------------------------------------------


                                        Indicators.--Health Project \13\
----------------------------------------------------------------------------------------------------------------
                                                              Definition of
      Objective-level  result       Objective  indicator        indicator           Baseline      Year 5 target
----------------------------------------------------------------------------------------------------------------
Increased control and prevention    Diabetes and          Percentage of people            24.4%            44.4%
 of NCDIs.                           hypertension          who, through a
                                     controlled.           combination of
                                                           diet, exercise and
                                                           medication,
                                                           successfully
                                                           control disease out
                                                           of population with
                                                           disease.
                                    Cervical cancer       Percent of women                   0%              80%
                                     prevention.           diagnosed with pre-
                                                           cancerous legions
                                                           who are
                                                           appropriately
                                                           treated \14\.
----------------------------------------------------------------------------------------------------------------
       Outcome-level result           Outcome indicator       Definition of         Baseline      Year 5 target
                                                                indicator
----------------------------------------------------------------------------------------------------------------
Early detection...................  Percentage of cancer  Percentage of                     28%              48%
                                     cases diagnosed in    cervical and breast
                                     early stages.         cancer cases
                                                           diagnosed in first
                                                           or second stage.
                                    Percent of those      Numerator: Number of              43%              59%
                                     with known            those previously
                                     diagnosis of          diagnosed with
                                     hypertension/         disease.
                                     diabetes out of all  Denominator: Number
                                     actual cases in       with disease as
                                     adult population.     determined by
                                                           biometric/
                                                           biochemical portion
                                                           of STEP Survey.
Increased access to efficient       Screened for breast   Number of women 35                TBD           39,000
 interventions.                      and cervical cancer.  to 40 who have ever
                                                           received a
                                                           comprehensive
                                                           preventative health
                                                           check-up including
                                                           a clinical breast
                                                           exam and visual
                                                           cervical exam \15\.
                                    Counseling for        Percent of patients               63%              95%
                                     diabetes and          diagnosed with
                                     hypertension.         elevated blood
                                                           pressure and/or
                                                           blood sugar who
                                                           receive proper
                                                           counseling \16\.
----------------------------------------------------------------------------------------------------------------

    The M&E Plan will also include specific indicators demonstrating 
knowledge, attitudes, and practice regarding NCDI risk factor reduction 
among target demographics. These indicators will capture the Outcome of 
``Increased Awareness of NCDIs.'' These indicators will be determined 
before Year 2 as studies on the best intervention strategies are 
concluded.
---------------------------------------------------------------------------

    \3\ Measured by total annual GDP. Units are 2007 USD converted 
at market rate.
    \4\ Baseline is computed a 1 US$ per day poverty line assuming 
total income from the 2003/03 HIES-LSMS as the welfare aggregate. 
The baseline and targets may be recalibrated in consultation with 
MCA-Mongolia using consumption as the welfare aggregate.
    \5\ For reporting, total GDP will suffice to monitor this 
indicator. Incremental GDP requires establishing a counterfactual 
which would require numerous assumptions and detailed modeling; this 
task may be included in the final evaluation.
    \6\ As of 2007, the only rail operator was UBTZ; however, it is 
possible for other rail operators to emerge in the future.
    \7\ A customer satisfaction survey will be carried out under the 
Compact.
    \8\ Average figure of 2.44 US$/sq meter represents 4 out of 8 
non-Ulaanbaatar communities; the baseline will be completed under 
the Compact.
    \9\ Baseline of 6,400 owners currently using their plots as 
collateral will be substantiated and possibly revised during Year 1 
of the Compact. If the baseline is revised, the target will be 
modified proportionally.
    \10\ Net of livestock-related expenses, land leasing payments, 
and debt service. Baseline of US$4,650 will be substantiated and 
revised if necessary during the Compact. If the baseline is revised, 
the target will be modified proportionally.
    \11\ Target is a weighted average for all students. Wages are 
expected to increase by 9% and 3% for employed graduates of regional 
methodological centers and other VTE schools respectively.
    \12\ Target is a weighted average for all students. Employment 
is expected to increase by 5% and 1% for graduates of regional 
methodological centers and other VTE schools respectively.
    \13\ All figures refer to the population within the areas 
targeted by the project, 60% of the country. The M&E Plan will 
disaggregate figures by breast cancer, cervical cancer, 
hypertension, and diabetes for the respective indicators. The 
figures presented here are the average of the two diseases (breast 
with cervical cancer and hypertension with diabetes).
    \14\ In 2006, there were 17 women treated for breast cancer and 
113 treated for cervical cancer (113 treated). These are national 
figures; the M&E Plan may choose to track figures specific to the 
target regions.
    \15\ The baseline for screening for breast and cervical cancer 
will be determined during Year 1 of the Compact.
    \16\ The figures presented here are based on successfully 
controlled cases according to the STEP survey 2006. The M&E Plan may 
use facility based data instead of the STEP survey in which case the 
baseline will be modified to reflect the change in data source.
---------------------------------------------------------------------------

    (b) Data Collection and Reporting. The M&E Plan shall establish 
guidelines for data collection and a reporting framework, including a 
schedule of Program reporting and responsible persons. The Technical 
Secretariat of

[[Page 61404]]

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

3. Evaluation Component

    The Program shall be evaluated on the extent to which the 
interventions contribute to the Compact Goal. The Evaluation Component 
of the M&E Plan shall contain a methodology, process and timeline for 
collecting and analyzing data in order to assess planned, ongoing, or 
completed Project activities to determine their efficiency, 
effectiveness, impact and sustainability. The evaluations should use 
state-of-the-art methods for addressing selection bias. The Government 
shall implement, or cause to be implemented, surveys to collect 
longitudinal data on both Beneficiary and non-Beneficiary households. 
The Evaluation Component shall contain plans for Final Evaluations and 
Ad Hoc Evaluations, and shall be finalized before any Disbursement for 
specific Project activities or the Program.
    (a) Final Evaluation. MCA-Mongolia shall engage an independent 
evaluator to conduct an evaluation of the Program at the expiration or 
termination of the Program (``Final Evaluation''). The evaluation 
methodology, timeline, data collection, and analysis requirements shall 
be finalized and detailed in the M&E Plan. The Final Evaluations shall 
at a minimum (i) estimate quantitatively and in a statistically valid 
way, the causal relationship between the Compact Goals (to the extent 
possible), the Project Objectives and Outcomes; (ii) determine if and 
analyze the reasons why the Compact Goals, Project Objectives and 
Outcomes were or were not achieved; and (iii) assess the overlapping 
benefits of the Projects.
    (b) Ad Hoc Evaluations or Special Studies. Either MCC or MCA-
Mongolia may request ad hoc or interim evaluations or special studies 
of Projects, Project Activities, or the Program as a whole prior to the 
expiration of the Compact Term (each, an ``Ad Hoc Evaluation''). If 
MCA-Mongolia engages an evaluator for an Ad Hoc Evaluation, the 
evaluator shall be an externally contracted independent source selected 
by MCA-Mongolia, subject to the prior written approval of MCC, 
following a tender in accordance with the MCC Program Procurement 
Guidelines, and otherwise in accordance with any relevant 
Implementation Letter, the Program Implementation Agreement or any 
other related agreement or arrangement. If MCA-Mongolia requires an ad 
hoc independent evaluation or special study at the request of the 
Government for any reason, including for the purpose of contesting an 
MCC determination with respect to a Project or Project Activity or 
seeking funding from other donors, no MCC Funding or MCA-Mongolia 
resources may be applied to such evaluation or special study without 
MCC's prior written approval.

4. Other Components of the M&E Plan

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

5. Implementation of the M&E Plan

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

Annex IV Definitions

    Ad Hoc Evaluation has the meaning provided in paragraph 3(b) of 
Annex III.
    ADB means the Asian Development Bank.
    Audit Guidelines has the meaning provided in section 3.8(a).
    Bank has the meaning provided in paragraph 3(a) of Part F of Annex 
I.
    Beneficiaries has the meaning provided in paragraph 2(a) of Annex 
I.
    Board has the meaning provided in paragraph 2(a)(i) of Part F of 
Annex I.
    Compact has the meaning provided in the Preamble.
    Compact Goal has the meaning provided in section 1.1.

[[Page 61405]]

    Compact Implementation Funding has the meaning provided in section 
2.2(a).
    Compact Records has the meaning provided in section 3.7(a).
    Compact Term has the meaning provided in section 7.4.
    Covered Provider has the meaning provided in section 3.7(c).
    Disbursement has the meaning provided in section 2.3.
    EMP means an environmental management plan.
    Evaluation Component has the meaning provided in paragraph 1 of 
Annex III.
    Final Evaluation has the meaning provided in paragraph 3(a) of 
Annex III.
    Fiscal Agent has the meaning provided in paragraph 3(b) of Part F 
of Annex I.
    Goal Indicator has the meaning provided in paragraph 2(a) of Annex 
III.
    Government has the meaning provided in the Preamble.
    Health Project mean the Project described in Part E of Annex I.
    IAS means the standards issued by the International Accounting 
Standards Board and include International Accounting Standards, 
International Financial Reporting Standards and interpretations of 
each.
    Implementation Letter has the meaning provided in section 3.5.
    Indicators has the meaning provided in paragraph 2(a) of Annex III.
    Inspector General has the meaning provided in section 3.8(a).
    LeaseCo has the meaning provided in paragraph 2(b) of Part B of 
Annex I.
    LeaseCo Assets has the meaning provided in paragraph 2(c)(i) of 
Part B of Annex I.
    M&E Plan has the meaning provided in Annex III.
    MCA-Mongolia has the meaning provided in paragraph 2(a) of Part F 
of Annex I.
    MCC has the meaning provided in the Preamble.
    MCC Environmental Guidelines has the meaning provided in section 
2.6(c).
    MCC Funding has the meaning provided in section 2.1.
    MCC Indemnified Party has the meaning provided in section 6.7.
    MCC Program Procurement Guidelines has the meaning provided in 
section 3.6.
    MCC Website has the meaning provided in section 2.6.
    Monitoring Component has the meaning provided in paragraph 1 of 
Annex III.
    MRA has the meaning provided in paragraph 2(a) of Part B of Annex 
I.
    NABVET has the meaning provided in paragraph 2(a)(ii) of Part D of 
Annex I.
    National Council means the MCA National Council that was 
established by the Government, with high-level representation from the 
Government, civil society and the private sector to develop a proposal 
for MCC assistance to Mongolia.
    NCDI has the meaning provided in section 1.2(d).
    Objective Indicator has the meaning provided in paragraph 2(a) of 
Annex III.
    OpCo has the meaning provided in paragraph 2(b)(iii) of Part B 
Annex I.
    Outcome Indicator has the meaning provided in paragraph 2(a) of 
Annex III.
    Outcomes has the meaning provided in paragraph 1 of Annex III.
    Output Indicator has the meaning provided in paragraph 2(a) of 
Annex III.
    Parties has the meaning provided in the Preamble.
    Permitted Account has the meaning provided in section 2.3.
    Principal Representative has the meaning provided in section 4.2.
    Procurement Agent has the meaning provided in paragraph 3(c) of 
Part F of Annex I.
    Program has the meaning provided in the Preamble.
    Program Implementation Agreement has the meaning provided in 
section 3.1.
    Project has the meaning provided in paragraph 2 of Part A of Annex 
I.
    Project Activity means the various activities to be undertaken in 
the implementation of particular Projects, including:
     With respect to the Rail Project, the:
     [cir] Rail Sector Technical Assistance Activity,
     [cir] LeaseCo Establishment Activity, and
     [cir] LeaseCo Operation Activity;
     With respect to the Property Rights Project, the:
     [cir] Improvement of the Land Privatization and Registration 
System Activity,
     [cir] Privatization & Registration of Ger Area Land Plots 
Activity, and
     [cir] Peri-Urban Land Leasing Activity;
     With respect to the Vocational Education Project, the:
     [cir] Reforms to TVET Policy and Operational Framework Activity,
     [cir] Creation of Skills Standards and Competencies System 
Activity,
     [cir] Competency-Based Training System Activity, and
     [cir] Career Guidance System Activity; and
     With respect to the Health Project, the:
     [cir] NCDI Capacity Building Activity,
     [cir] NCDI Prevention Activity,
     [cir] NCDI Early Detection Activity, and
     [cir] NCDI Management Activity.
    Project Objective has the meaning provided in section 1.2.
    Property Rights Project mean the Project described in Part C of 
Annex I.
    Provider has the meaning provided in section 3.7(c).
    Rail Project mean the Project described in Part B of Annex I.
    Stakeholders' Committee has the meaning provided in paragraph 2(e) 
of Part F of Annex I.
    Target has the meaning provided in paragraph 2(a) of Annex III.
    Taxes has the meaning provided in Section 2.7(a).
    Technical Secretariat has the meaning provided in paragraph 
2(a)(ii) of Part F of Annex I.
    TVET has the meaning provided in paragraph 2(a) of Part D of Annex 
I.
    UBTZ has the meaning provided in paragraph 1 of Part B of Annex I.
    Vocational Education Project mean the Project described in Part D 
of Annex I.
    WHO has the meaning provided in paragraph 4 of Part E of Annex I.

[FR Doc. E7-21306 Filed 10-29-07; 8:45 am]
BILLING CODE 9211-03-P