[Federal Register Volume 73, Number 39 (Wednesday, February 27, 2008)]
[Notices]
[Pages 10472-10496]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-3661]


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MILLENNIUM CHALLENGE CORPORATION

[MCC FR 08-02]


Notice of Entering Into a Compact With the Government of the 
United Republic of Tanzania

AGENCY: Millennium Challenge Corporation.

ACTION: Notice.

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SUMMARY: In accordance with Section 610(b)(2) of the Millennium 
Challenge Act of 2003 (Pub. L. 108-199, Division D), the Millennium 
Challenge Corporation (MCC) is publishing a summary and the complete 
text of the Millennium Challenge Compact between the United States of 
America, acting through the Millennium Challenge Corporation, and the 
Government of the United Republic of Tanzania acting through the 
Ministry of Finance. The President of the United States of America and 
the President of the United Republic of Tanzania executed the Compact 
documents on February 17, 2008.

    Dated: February 21, 2008.
William G. Anderson Jr.,
Vice President & General Counsel, Millennium Challenge Corporation.

Summary of Millennium Challenge Compact With the Government of the 
United Republic of Tanzania

A. Introduction

    The United Republic of Tanzania, comprised of the mainland and 
Zanzibar, is strategically located in East Africa bordering the Indian 
Ocean and eight nations.\1\ Tanzania plays an important role in the 
region as an economic trade partner and stands out

[[Page 10473]]

as a proponent of peace and security. In a region that has historically 
been divided by violent ethnic and religious conflict, Tanzania has 
been a peaceful country with a religiously diverse population, abundant 
natural resources, and a distinct sense of national pride and identity. 
However, this stability has not translated into widespread economic 
prosperity, as nearly 36 percent of the mainland population and 49 
percent of the Zanzibar population live below the national poverty 
line. An inadequate transportation network, an insufficient and 
unreliable supply of energy, and a shortage of potable water are three 
key constraints to economic growth and private investment in Tanzania. 
The program (Program) to be funded under the proposed Millennium 
Challenge Compact (Compact) with the Government of the United Republic 
of Tanzania (GoT) is designed specifically to address each of these 
constraints.
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    \1\ The countries bordering Tanzania are Kenya, Uganda, Rwanda, 
Burundi, Democratic Republic of Congo, Zambia, Malawi, and 
Mozambique.
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B. Program Overview and Budget

    The overall goal of the Program is to stimulate economic growth, 
increase household incomes, and raise the quality of life through 
targeted infrastructure investments in transport, energy, and water. 
The specific objectives of the Program are to increase agricultural 
activity and to increase business investment and spending by visitors 
through activities in the transport sector (Transport Sector Project), 
to increase investment, economic output and household productivity in 
several regions through activities in the energy sector (Energy Sector 
Project), and to increase investment in human and physical capital in 
two large cities through activities in the water sector (Water Sector 
Project) (each, a Project).
    The table below shows the total budget and an estimated investment 
plan for the Program.

----------------------------------------------------------------------------------------------------------------
                                                                    Program budget (US$ '000)
                                               -----------------------------------------------------------------
                  Description                   CIF \2\ &
                                                  year 1     Year 2     Year 3     Year 4     Year 5     Total
----------------------------------------------------------------------------------------------------------------
Transport Sector Project......................     21,552     84,406    147,131     82,606     37,081    372,776
Energy Sector Project.........................     16,646     45,501     53,435     59,083     31,806    206,471
Water Sector Project..........................      5,845     16,959     17,786     16,838      8,908     66,336
Monitoring & Evaluation.......................      2,500      1,000      1,000      1,000      4,500     10,000
Program Administration........................     11,202      7,615      7,900      7,868      7,968     42,553
                                               -----------------------------------------------------------------
    Total.....................................     57,745    155,481    227,252    167,395     90,263    698,136
----------------------------------------------------------------------------------------------------------------

     
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    \2\ This refers to the period between the Compact's conclusion 
and its entry into force.
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1. Transport Sector Project ($372.8 Million)
    Transport infrastructure in Tanzania is inadequate to meet the 
needs of the country's widely dispersed population. The Transport 
Sector Project aims to reduce travel times and provide access to basic 
social services by rehabilitating a portfolio of trunk roads on the 
mainland and the airport on Mafia Island, both originating from the 
GoT's Transport Sector Investment Program (TSIP) for mainland Tanzania, 
as well as selected rural roads on Pemba Island in Zanzibar. To ensure 
the sustainability of these investments, the Project will provide 
technical assistance to enhance the maintenance capacity of the GoT in 
both the road and airport sectors.
     Mainland Trunk Roads. The Project includes rehabilitation 
of three trunk roads on the mainland: (i) Tanga--Horohoro, a 68 km 
stretch of highway in northeast Tanzania connecting the seaport of 
Tanga with Horohoro at the Kenyan border whose rehabilitation will ease 
transport of goods between Dar es Salaam and Kenya, (ii) Tunduma--
Sumbawanga, a 224 km stretch of highway in western Tanzania, a very 
fertile agricultural area, constituting the southernmost part of the 
Western Corridor representing the only link between Dar es Salaam and 
Zambia, and (iii) Mtwara Corridor, a 139 km stretch of highway in 
southwestern Tanzania, the westernmost part of the Southern Corridor 
that runs from the Indian Ocean port of Mtwara to Mbamba Bay on Lake 
Nyasa.
     Zanzibar Rural Roads. The Project includes rehabilitation 
of up to five rural roads on Pemba Island, totaling approximately 35 
km.
     Road Maintenance. The Project includes enhancement of 
Tanzania's capacity to maintain its road network. Specifically, this 
activity will support improvements in institutional capacity for 
strategic maintenance planning, and management of routine and periodic 
maintenance contracts of Tanzania National Roads Agency (TANROADS) for 
the mainland and the Ministry of Communications and Transport for 
Zanzibar.
     Mafia Island Airport. The Project includes provision of 
necessary aviation and public safety related facilities at the airport 
on Mafia Island, which is located off the east coast of Tanzania, 
approximately 135 km southeast of Dar es Salaam. Due to the poor 
condition of the airport and lack of feasible alternative 
transportation options, this activity will keep the airport open and 
prevent the island's residents from being cut off from the mainland. 
The activity also includes provision of technical assistance to the 
Tanzania Airports Authority (TAA) for implementation of the activity 
and maintenance planning.
2. Energy Sector Project ($206.5 Million)
    Currently in Tanzania, industry, businesses, and households suffer 
from either a lack of energy services or unreliable service. Where 
electricity is available, the quality of supply is poor, and blackouts 
and other service interruptions are common. The Energy Sector Project 
will improve electricity service and coverage in Tanzania through the 
addition of new power generation, transmission and distribution 
capacity, as well as through much needed reinforcement of the existing 
network. The Project is expected to result in improved reliability and 
quality of electric power, and the extension of service to communities 
and businesses not currently served.
     Zanzibar Interconnector. The Project includes laying an 
approximately 40 km long, 100 MW capacity submarine electric 
transmission cable (including telecom fiber optic shield wire) from the 
mainland to Unguja Island, along the path of the existing submarine 
cable that is reaching its limits in both capacity and lifespan. To 
support the additional transmission capacity, the activity also 
includes the reinforcement of substations at either end of the cable, 
as well as the corresponding installation of roughly 20 km of 
supplementary

[[Page 10474]]

transmission capacity along existing lines. This activity is expected 
to provide a reliable and non-polluting power supply to Unguja Island, 
the largest island in the Zanzibar archipelago with a population of 
approximately 700,000, which is entirely dependent on power supply from 
the mainland. This will allow the island to continue to develop its 
potential as a high-value tourist destination. The increased supply of 
electricity will also improve the productivity and quality of life for 
the island's population.
     Malagarasi Hydropower & Kigoma Distribution. The Project 
includes the construction of a small, 8 MW run-of-river hydropower 
plant on the Malagarasi River at Igamba Falls, and the extension of a 
mini-grid system in the Kigoma region, which suffers from an inadequate 
and unreliable power supply. This lack of access to reliable power has 
been one of the major constraints to investment in commercial and 
industrial operations in the region. This activity seeks to displace 
costly, inefficient, and polluting diesel power generation with 
affordable, reliable, and clean renewable small-scale hydropower. The 
expanded distribution system will also facilitate the electrification 
of rural villages and towns. In addition, this activity will include 
the assessment and design of a public-private partnership for the 
independent operation of the completed mini-grid system. Such 
partnership will provide an opportunity to increase the participation 
of the private sector in the national electricity system.
     Distribution Systems Rehabilitation & Extension. The 
Project includes the rehabilitation of existing distribution 
infrastructure and a number of small distribution line extensions to 
un-served areas in six regions (Mwanza, Tanga, Morogoro, Iringa, 
Dodoma, and Mbeya) that were identified by the GoT as priority areas 
for investment. By complementing similar projects to be funded by the 
World Bank in the regions of Dar es Salaam, Kilimanjaro, and Arusha, 
this activity will address the growing demand and the corresponding 
strain on the network to deliver reliable and quality power to 
industrial and commercial users, as well as to households, in these 
regions.
3. Water Sector Project ($66.3 Million)
    Tanzania faces a serious shortage of access to potable water, 
resulting in a high incidence of water-related disease, decreased 
workforce productivity, and a challenge for business growth. To address 
these issues, the GoT, in coordination with other stakeholders 
(including donors) developed a 20-year program for transforming the 
sector known as the Water Sector Development Program (WSDP). The WSDP 
identifies all activities under the Water Sector Project as priorities. 
The Water Sector Project focuses on improving water supply 
infrastructure in Dar es Salaam and Morogoro, and is designed to 
increase the quantity and reliability of potable water for domestic and 
commercial use. By increasing the volume of water supply, the Water 
Sector Project is expected to reduce the prevalence of water-related 
disease, to increase time available for productive activities such as 
education, and to promote greater investments in physical capital.
     Lower Ruvu Plant Expansion. Dar es Salaam, Tanzania's 
largest city and commercial center, is experiencing a severe water 
crisis due to a shortage of water supply and poor water quality. The 
Project includes expansion of the capacity of the Lower Ruvu water 
treatment plant from about 180 million liters per day (MLD) to 
approximately 270 MLD. In addition, technical assistance for the Dar es 
Salaam Water and Sewerage Authority (DAWASA) will be provided.
     Non-Revenue Water. The Project includes improvement to the 
system efficiencies of DAWASA and Dar es Salaam Water and Sewerage 
Company (DAWASCO) to determine the locations and volumes of physical 
losses through leaks, and commercial losses as a result of deficiencies 
in billing and collection and theft. Currently, approximately 60 
percent of Dar es Salaam water is lost due to physical leakages and 
commercial losses. This activity, to be built on past and ongoing donor 
activities, will substantially reduce water resource waste and the need 
to develop new water sources, and will improve the long-term financial 
viability of DAWASA and DAWASCO. Specifically, the activity includes a 
comprehensive assessment of the Dar es Salaam water supply system, its 
physical and commercial losses, the development of performance 
benchmarks for reduction of these losses, and the implementation of a 
performance-based contract by a private sector firm to achieve those 
benchmarks. The activity also includes technical assistance to DAWASA 
and DAWASCO for implementation of the activity.
     Morogoro Water Supply. The Project includes improvements 
to water supply in Morogoro, a city that, due to a growing population 
coupled with its aging water infrastructure, faces water supply 
deficiencies and increased health risks for its population. 
Specifically, this will be achieved through the rehabilitation of the 
Mambogo water intake and water treatment plant (including the addition 
of a 6 MLD capacity), rehabilitation of the Mafiga water treatment 
plant, and improvement to the existing distribution network (including 
a 1.9 kilometer pressure main). In addition, technical assistance will 
be provided to Morogoro Urban Water and Sewerage Authority (MORUWASA) 
to support its continued progress toward achieving financial 
sustainability, including meeting its operation and maintenance costs 
and capital expenditure requirements.

C. Impact

    The Program's investments in the transport, energy, and water 
sectors are critical to Tanzania's development.
    First, poor transport infrastructure is a constraint to Tanzanian 
economic growth. In Tanzania, roads are essential for commerce 
(especially agricultural commerce), and for trade between Tanzania and 
its neighboring countries, including Kenya, Mozambique and Malawi. The 
rehabilitation of the roads, therefore, will help connect road users 
and communities along the rehabilitated roads with markets, schools and 
health clinics, and promote the expansion of economic opportunities by 
reducing transport costs and thus increasing the economic viability of 
various local products, including cash crops. The rehabilitation of the 
airport on Mafia Island will allow for easier, more efficient, and 
safer access to the island, resulting in increased tourist and business 
travel to and from the mainland, leading to additional income on the 
island.
    Second, an inadequate supply of energy is also a constraint to 
private investment and economic growth in Tanzania. Energy is essential 
for activities in industry, agriculture, transport and water service 
supply, and for the provision of social services such as education and 
health. Moreover, it serves as an important catalyst for private sector 
development. The Energy Sector Project will result in households and 
businesses receiving more reliable and better quality electricity, and 
many currently un-served households and businesses will receive 
electricity for the first time.
    Third, a shortage of access to potable water by both households and 
businesses is another constraint to Tanzanian economic growth addressed 
by the Program. Water is an important input to production in many 
industries, and expanding the supply of water will allow the expansion 
of economic

[[Page 10475]]

activity as well. In addition, lack of access to potable water results 
in a high incidence of water-related disease, burdensome healthcare 
costs, and decreased workforce productivity. By improving the water 
supply, incidence of disease and time spent collecting water will 
decrease, resulting in potential gains in labor productivity. 
Households, businesses and institutions relying on network water will 
benefit from improvements in water supply under the Water Sector 
Project.
    Finally, the Compact development process itself has already 
contributed to encouraging the GoT to undertake important policy 
reforms in the transport, energy, and water sectors, the absence of 
which have constrained economic and private sector growth in Tanzania 
for years. Moreover, the various investments in physical infrastructure 
during the implementation of the Program will be tied to continued 
policy and sector reform.

D. Program Management

    In September 2007, the GoT established MCA-Tanzania, the 
accountable entity for the Program, as a department within the Ministry 
of Finance with budgetary and operational independence. The early 
establishment of MCA-Tanzania allowed for commencement of preparatory 
activities funded under the pre-Compact 609(g) grant agreement, signed 
in October 2007, in order for timely and efficient implementation of 
the Program once the Compact enters into force.
    MCA-Tanzania consists of a governing board (Governing Board), and a 
secretariat (Secretariat). The Governing Board has final decision-
making authority over the implementation of the Program, and consists 
of seven representatives from the GoT (including two representatives 
from Zanzibar) and four representatives from the private sector and the 
civil society. The Secretariat supports the Governing Board in the 
implementation of the Program. A chief executive officer manages the 
day-to-day activities of MCA-Tanzania, and is supported by senior 
directors together with other managers, officers, and administrative 
staff.
    MCA-Tanzania is in the final stages of selecting, through 
competitive processes, a third party, non-government entity to provide 
procurement agent and oversight services for MCA-Tanzania, to include 
acting as procurement agent for MCA-T administrative procurements, the 
Zanzibar Rural Roads Activity, all Water Sector Project Activities, and 
two Energy Sector Project Activities. In its capacity as advisor, the 
firm will provide training and support services to three government 
procurement entities on certain procurements for the transport and 
energy projects. MCA-Tanzania will work with the various ministries, 
departments, and agencies of the GoT to implement the Projects with one 
exception: Due to capacity limitations, the rehabilitation of the rural 
roads in Zanzibar will be implemented by a competitively procured 
project management firm.
    The Office of the Accountant General in Tanzania's Ministry of 
Finance has established a Fiscal Agent Unit within the Office, staffed 
from existing office resources, for the Program. Under the direction of 
MCA-T's Director of Finance and Administration, this Unit will provide 
all financial reports under the Compact and relevant supplementary 
agreements; perform coordination efforts related to fiscal management 
including operating procedure development; provide information 
technology support including Web site development and maintenance; 
monitor and perform the necessary input interface with the U.S. 
Treasury International Treasury System (``ITS''); manage asset control 
and accountability; and respond to all MCA-T management requests.

E. Assessment

1. Economic Analysis
    The estimated sector-level economic rates of return (ERRs) \3\ for 
the mainland are: (i) For the transport sector, 16%, (ii) for the water 
sector, 20%, and (iii) for the energy sector, 27%. The overall ERR for 
the activities in Zanzibar is 18%.
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    \3\ These sector-level ERRs include administrative costs.
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    The estimated Project Activity-level ERRs for the Program are 
presented in the table below.

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                                                                 ERR
             Project                      Description         (percent)
------------------------------------------------------------------------
Transport Sector.................  Mainland Trunk Roads....  ...........
                                   Tanga-Horohoro..........           15
                                   Tunduma-Sumbawanga......           20
                                   Mtwara Corridor.........           14
                                   Zanzibar Rural Roads....           12
                                   Mafia Island Airport....           17
Energy Sector....................  Zanzibar Interconnector.           21
                                   Malagarasi Hydropower &            20
                                    Kigoma Distribution.
                                   Distribution Systems      ...........
                                    Rehabilitation &
                                    Extension.
                                   Mwanza..................           31
                                   Tanga...................           42
                                   Morogoro................           24
                                   Iringa..................           52
                                   Dodoma..................           16
                                   Mbeya...................           53
Water Sector.....................  Lower Ruvu Plant                   27
                                    Expansion.
                                   Non-Revenue Water.......           21
                                   Morogoro Water Supply...            5
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2. Consultative Process
    The consultative process for the Program was anchored in the 
ongoing consultative process for Tanzania's National Strategy for 
Growth and Reduction of Poverty (commonly referred to by its Swahili 
acronyms, MKUKUTA/MKUZA, for the mainland and Zanzibar, respectively). 
The MKUKUTA/MKUZA process yielded broadly endorsed national sector 
strategies, and Projects were developed

[[Page 10476]]

on the basis of these strategies. Building on the success of and 
lessons learned from the MKUKUTA/MKUZA consultative process, the GoT 
designed and followed a comprehensive outreach strategy.
    Specifically, national outreach activities were conducted by the 
GoT's core team, including visits to all of the sites for the proposed 
Projects on the mainland and Zanzibar. Discussions were held with key 
stakeholders including representatives from regional, district, and 
local council government offices, members of parliament, the World 
Wildlife Fund, the Tanzania National Business Council, the Tanzanian 
Chamber of Commerce, Industry, and Agriculture, the Tanzania 
Association of NGOs, the Association of NGOs in Zanzibar, and women's 
groups such as the Tanzania Gender Networking Programme.
    In addition, the GoT will utilize regional development committees 
in Project-affected areas to continue the consultative process 
throughout the implementation of the Program. These committees will 
include stakeholders from various non-governmental organizations, the 
private sector, and local and regional governments. These committees 
will not have decision-making authority, but will serve as a mechanism 
for ongoing consultations between the GoT and the public.
3. GoT Commitment and Effectiveness
    The GoT's commitment is demonstrated in the allocation of 
significant human and financial resources to the Compact development 
process and in the GoT's receptiveness to substantive policy reforms. 
The GoT's core team has been led by a national coordinator with 30 
years of experience in public service who has recruited an impressive 
team. The GoT also constituted a high-level steering committee to 
oversee the Compact development process, led by the Permanent Secretary 
of the Ministry of Finance. In addition to representation by the 
Permanent Secretaries from various relevant ministries, the steering 
committee included a number of leaders from the private and non-
governmental sectors.
    Additional commitment by the GoT has been demonstrated by a 
willingness to undertake various reforms that are critical to the 
sustainability of the Program. For instance, the GoT has shown openness 
and commitment in the transport sector by its agreement to adhere to 
the improvement of prioritized corridors through the upgrade of trunk 
roads identified in the TSIP. The energy sector also has shown signs of 
movement toward commercialization, demonstrated by the restructuring of 
Tanzania Electric Supply Company Limited (TANESCO) and the emergence of 
an independent regulator for the energy and water sectors. Moreover, 
the GoT committed to passing a new act governing the electricity sector 
to bring up-to-date the current law (dating from 1931). Finally, the 
GoT contributed significant time and resources toward the preparation 
of environmental and social studies for many of the components of the 
Projects during the Compact development process. These contributions 
not only enhance the environmental sustainability of the Projects but 
also allow the improved designs and timely implementation of the 
Program.
4. Sustainability
    The sustainability of the investments in roads on both the mainland 
and Zanzibar is dependent upon adequate road maintenance. A significant 
policy reform towards mainland roads sustainability was demonstrated in 
July 2007 when the GoT nearly doubled its funding of road maintenance, 
an increase adequate to meet the maintenance costs of the mainland's 
road network. To encourage the GoT to take additional steps for 
improvement of the sustainability of the roads in Zanzibar, MCC will 
condition its investment in the rural roads on a significant increase 
in the current fuel levy in Zanzibar. Moreover, since adequate funding 
for maintenance of roads does not by itself ensure sustainability of 
the investments in roads, MCC will provide technical assistance to 
enhance the GoT's road maintenance capacity.
    The Energy Sector Project includes capacity building and technical 
support for both TANESCO and Zanzibar Electricity Corporation (ZECO). 
In addition, the implementation of the new Electricity Act, continued 
progress on tariff reform, and TANESCO Board reforms to increase its 
independence from the GoT, all required under the Compact, are 
significant safeguards that will contribute to sustainability.
    Under the Water Sector Project, the GoT has agreed to pursue 
financial recovery measures for DAWASA, DAWASCO and MORUWASA, and to 
include the implementation of tariffs that will fully recover 
operations and maintenance costs, and demonstrate a sustainable trend 
to recover capital costs within the term of the Compact.
    In addition, the Program includes provision of technical assistance 
to the National Environmental Management Council and the Zanzibar 
Department of the Environment, development and implementation of a 
gender integration plan, and support for environmental and social 
oversight of the Program. These activities will safeguard Tanzania's 
natural resources and enhance the sustainability of the Program as a 
whole. They will also contribute to long-term sustainable development 
of Tanzania by building capacity and systems to improve environmental 
management associated with the planning, design and implementation of 
infrastructure projects.
5. Environment and Social Impacts
    MCC will require that all Projects comply with the Tanzanian 
National Environmental Management Act and regulations, MCC's 
environmental guidelines and gender policy, and World Bank's 
Operational Policy on Involuntary Resettlement (OP 4.12).
    None of the Projects is likely to generate significant adverse 
environmental, health, or safety impacts, and all expected impacts can 
be mitigated. Several activities under the Transport Sector Project 
(``Category A'' according to MCC's environmental guidelines) have the 
potential for construction-related impacts such as erosion, drainage 
and run-off, and impacts to wildlife migration that will be mitigated 
through, among other measures, promotion of community-based natural 
resource management. Additional potential secondary and cumulative 
impacts such as increased deforestation due to logging and prolific 
charcoal manufacturing may have adverse environmental and social 
impacts and will be mitigated through sustainable community development 
initiatives. Similarly, potential negative environmental and social 
impacts of the Energy Sector Project (``Category A'') and the Water 
Sector Project (``Category B'') include health and safety risks, as 
well as construction-related impacts on communities including increased 
HIV/AIDS transmission and economic and physical resettlement. With 
proper planning and oversight by MCA-Tanzania and environmental and 
social oversight consultants, all negative impacts and risks identified 
through these assessments will be mitigated.
    In addition, the Program is expected to yield the following 
positive environmental and social impacts: (i) Increased opportunities 
for community-based natural resource management in the proximity of the 
southern sections of the mainland's trunk roads, (ii) reduction in time 
spent accessing cultural and natural resources through the provisioning 
of renewable energies

[[Page 10477]]

and improved infrastructure, (iii) increased access and participation 
of civil society and women through public consultation and a Program-
wide gender integration action strategy, (iv) reduction in the need to 
develop new water sources and reduce water resource wastage, and (v) 
improved environmental management capacity to support further 
sustainable development.
6. Donor Coordination
    The mainland trunk roads activity under the Transport Sector 
Project was developed in consultation with the principal donors in the 
transport sector in Tanzania, including the European Union, World Bank, 
African Development Bank (AfDB), the Danish International Development 
Agency (DANIDA), and the governments of Norway and Japan. The plan to 
upgrade Zanzibar's rural roads was developed in consultation with other 
donors working in Zanzibar, primarily the World Bank, DANIDA, and the 
Government of Norway. The airport on Mafia Island represents one of 
eleven airports identified in the TSIP, and is included in the TAA's 
ongoing feasibility, environmental and social impact assessment, and 
detailed design study funded by the World Bank. Finally, a measure to 
support environmental sustainability of the upgrades to the various 
roads through the community-based natural resource management builds 
upon efforts of United States Agency for International Development 
(USAID), and will be implemented in collaboration with USAID.
    Donors, including the governments of Sweden, Norway, and Japan, the 
World Bank, and the AfDB, among others, play an active role in 
improving Tanzania's energy sector through support for policy reform, 
technical assistance and infrastructure investments. The Energy Sector 
Project has benefited significantly from these donors' activities while 
MCC has provided important additional leverage for needed policy and 
regulatory reform including the passage of new legislation governing 
the electricity sector, tariff reform, and financial sustainability of 
TANESCO and ZECO. Moreover, the Malagarasi hydropower plant benefited 
from a pre-feasibility study financed by the AfDB and the World Bank. 
Finally, MCC's review of the proposal to upgrade the distribution 
systems in Mwanza, Tanga, Morogoro, Iringa, Dodoma and Mbeya benefited 
from active intervention and support by the Swedish International 
Development Cooperation Agency and the World Bank.
    All components of the Water Sector Project are priority projects 
identified under the WSDP. The donors participating in the WSDP include 
the World Bank, the governments of Germany, the Netherlands, France, 
and Japan as well as the United Nations Development Programme, the 
United Nations Children's Fund, Food and Agriculture Organization, and 
the AfDB. MCC coordinated with these organizations throughout the 
review and development of the Water Sector Project, and continues to 
engage with them.

Millennium Challenge Compact Between the United States of America 
Acting Through the Millennium Challenge Corporation and the Government 
of the United Republic of Tanzania Acting Through the Ministry of 
Finance

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; Compact Status
    Section 6.1 Annexes
    Section 6.2 Inconsistencies
    Section 6.3 Amendments
    Section 6.4 Compact Status
    Section 6.5 Additional Instruments
    Section 6.6 References to MCC Web site
    Section 6.7 Exclusion Clause
    Section 6.8 References to Laws, Regulations, Policies and 
Guidelines
Article 7. Entry Into Force
    Section 7.1 Domestic Requirements
    Section 7.2 Conditions Precedent
    Section 7.3 Date of Entry into Force
    Section 7.4 Compact Term
Article 8. Consultations
    Section 8.1 Consultation
Annex I: Program Description
Annex II: Program Budget
Annex III: Summary of Monitoring and Evaluation Plan

Millennium Challenge Compact

Preamble

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

Article 1. Goal and Objectives

Section 1.1 Compact Goal.

    The goal of this Compact is to advance economic growth and poverty 
reduction in Tanzania through strategic investments in transportation, 
energy, and water infrastructure (the ``Compact Goal'').

Section 1.2 Project Objectives.

    The objectives of the Projects (each, a ``Project Objective'') are:
    (a) To increase cash crop revenue and aggregate visitor spending 
through the Transport Sector Project;
    (b) To increase value added of businesses through the Energy Sector 
Project; and
    (c) To increase investment in human and physical capital and reduce 
the prevalence of water-related diseases through the Water Sector 
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.

    The MCC hereby grants to the Government, under the terms of this 
Compact, an amount not to exceed Six Hundred Ninety-Eight Million One 
Hundred and Thirty-Six Thousand United States Dollars (US$698,136,000) 
(``MCC Funding'') for use by the Government in the implementation of

[[Page 10478]]

the Program, as more specifically described in Annex II to this 
Compact.

Section 2.2 Compact Implementation Funding.

    (a) Of the total amount of MCC Funding, the MCC shall make up to 
Eleven Million Eight Hundred and Ninety-Six Thousand United States 
Dollars (US$11,896,000) (``Compact Implementation Funding'') available 
to the Government under Section 609(g) of the Millennium Challenge Act 
of 2003 for:
    (i) Administrative activities for MCA-Tanzania (as defined below), 
including start-up costs such as staff salaries, rent, cost of 
purchasing computers and other information technology or capital 
equipment and other similar expenses; and
    (ii) Any other activities relating to the implementation of the 
Compact, approved by the MCC.
    (b) The Parties shall provisionally apply this Section 2.2, and 
Sections 2.6, 2.7 and 3.5 below, after the MCC and the Government sign 
this Compact until this Compact enters into force under Section 7.3. 
Compact Implementation Funding also shall be subject to the 
requirements, restrictions and procedures set out in writing by the 
MCC.

Section 2.3 Disbursement

    In accordance with this Compact and the Program Implementation 
Agreement (as defined below), the 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 either (a) by deposit to a 
bank account established by the Government and acceptable to the MCC (a 
``Permitted Account'') or (b) through direct payment to the relevant 
provider of goods, works or services in furtherance of this Compact, as 
appropriate. 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 the MCC any interest and other earnings 
that accrue on MCC Funding in accordance with the Program 
Implementation Agreement (whether by directing such payments to the 
bank account outside Tanzania designated by the 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 the 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 the MCC, or by posting at www.mcc.gov (``MCC Web site''), 
including but not limited to the following purposes:
    (a) For assistance to, or training of, the military, police, 
militia, national guard or other quasi-military organization or unit;
    (b) For any activity that is likely to cause a substantial loss of 
United States jobs or a substantial displacement of United States 
production;
    (c) To undertake, fund or otherwise support any activity that is 
likely to cause a significant environmental, health, or safety hazard 
as further described in MCC environmental guidelines posted on the MCC 
Web site (``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 the 
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 Providing For the 
Furnishing of Economic, Technical, and Related Assistance'' between the 
United States and the Government, entered into force on February 8, 
1968.
    (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 the MCC the amount of such Tax out of its national 
funds, and no MCC Funding, proceeds thereof, or Program asset may be 
applied by the Government in satisfaction of its obligations under this 
Section 2.7(b).

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 
the MCC and the Government, which agreement will address, among other 
matters, implementation arrangements, fiscal accountability, 
disbursement and use of MCC Funding, procurement and applicable tax 
exemptions (the ``Program Implementation Agreement'' or ``PIA'').

Section 3.2 Government Responsibilities

    (a) The Government shall have the principal responsibility of 
overseeing and managing the implementation of the Program.
    (b) 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.
    (c) The Government shall ensure that no law or regulation in 
Tanzania now or hereinafter in effect makes, or will make unlawful, or 
otherwise prevent or hinder the performance of any of its obligations 
under this Compact, the PIA or any other agreement related thereto or 
any transaction contemplated thereunder.
    (d) The Government shall fund all costs in excess of those budgeted 
for the Program, as set forth in Annex II (as such may be modified in 
accordance with the terms thereof), in order to ensure the full and 
complete implementation of the Program.

Section 3.3 Policy Performance

    In addition to the specific policy, legal and regulatory reform

[[Page 10479]]

commitments identified in Annex I to this Compact, the Government shall 
commit to maintain and improve its level of performance under the 
policy criteria (relating to just governance, economic freedom and 
investments in people) identified in Section 607 of the Millennium 
Challenge Act of 2003, and the selection criteria and methodology used 
by the MCC.

Section 3.4 Government Assurances

    The Government assures the MCC that:
    (a) As of the date this Compact is signed by the Government, the 
information provided to the MCC by or on behalf of the Government in 
the course of reaching agreement with the MCC on this Compact is, taken 
as a whole, 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 Tanzania; 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, the MCC may provide guidance to the Government 
in writing on all 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

    Under the exception set forth in Section 4 of the Public 
Procurement Act No. 21 of 2004, 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 and 
conducted in accordance with the procurement guidelines notified by the 
MCC to the Government in writing or by posting on the MCC Web site, or 
otherwise made publicly available (``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 adequate to show, to the MCC's satisfaction, 
the use of all MCC Funding (``Compact Records''). In addition, the 
Government shall furnish or cause to be furnished all Compact Records 
to the MCC when the 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 accordance with accounting principles prescribed by the 
International Accounting Standards Committee. 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 otherwise agree 
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 the 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 the 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 the MCC's request, the Government, at all 
reasonable times, shall permit, or cause to be permitted, authorized 
representatives of the 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 the 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 in accordance with this Section 3.8(a). 
The initial financial audit shall cover the period from signing of this 
Compact until the earlier of the following December 31 and June 30, and 
all subsequent financial audits shall cover each six-month period 
thereafter ending December 31 and June 30 through the end of the 
Compact Term, in each case in accordance with the terms of the PIA. 
Upon the MCC's request, to conduct such audits, the Government shall 
use, or cause to be used, an auditor approved by the 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. Each audit 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 the 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 otherwise agree in writing.
    (b) Audits of United States Entities. The Government shall ensure 
that agreements between the Government or any Provider, on the one 
hand, and a United States nonprofit organization, on

[[Page 10480]]

the other hand, that are financed with MCC Funding state that the 
United States organization is subject to the applicable audit 
requirements contained in OMB Circular A-133. The Government 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 
for-profit Covered Provider is subject to audit by the cognizant United 
States Government agency, unless the Government and the 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 the MCC. The MCC shall have the right to arrange for 
and conduct audits of the Government's use of MCC Funding.
    (e) Cost of Audits, Reviews or Evaluations. MCC Funding may be used 
to fund the costs of any audits, reviews or evaluations required under 
this Compact, including as reflected on Annex II to this Compact.

Article 4. Communications

Section 4.1 Communications

    Any document or communication required or submitted by either Party 
to the other under this Compact shall be in writing and, except as 
otherwise agreed between the Parties, in English. For this purpose, the 
address of each Party is set forth below.
To the MCC
    Millennium Challenge Corporation, Attention: Vice President for 
Compact Implementation, (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 Compact 
Implementation), [email protected] (Vice President and General 
Counsel).
To the Government
    The Government of the United Republic of Tanzania, Attention: The 
Permanent Secretary, Ministry of Finance, Madaraka Avenue, P.O. Box 
9111, Dar es Salaam, Tanzania, Facsimile: 255 22 2110326, Telephone: 
255 22 2111174, E-mail: [email protected].
With a Copy to MCA-Tanzania
    Millennium Challenge Account--Tanzania, Attention: Chief Executive 
Officer, Kivukoni Front/Ohio Street, P.O. Box 8327, Dar es Salaam, 
Tanzania, Facsimile: 255 22 2124644, Telephone: 255 22 2124634, E-mail: 
To be designated in writing to the MCC by MCA-Tanzania.

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 Permanent Secretary to the Treasury, and the MCC shall be 
represented by the individual holding the position of, or acting as, 
Vice President for Compact Implementation (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) The 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 the MCC determines that any circumstance 
identified by the MCC as a basis for suspension or termination (whether 
in writing to the Government or by posting on the MCC Web site) has 
occurred, which circumstances include but are not limited to the 
following:
    (i) The Government fails to comply with its obligations under this 
Compact, the PIA or any other agreement or arrangement entered into by 
the Government in connection with this Compact or the Program;
    (ii) An event has occurred that, in the MCC's determination, makes 
achievement of any Project Objective improbable during the term of this 
Compact or makes it improbable that the Government will be able to 
perform its obligations under this Compact;
    (iii) Any use of MCC Funding or continued implementation of this 
Compact that 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 Tanzania ineligible to receive United States 
economic assistance under Part I of the Foreign Assistance Act of 1961 
(22 U.S.C. 2151, et seq.), by reason of the application of any 
provision of the Foreign Assistance Act of 1961 or any other provision 
of law;
    (vi) The Government has engaged in a pattern of actions 
inconsistent with the criteria used to determine the eligibility of 
Tanzania for assistance under the Millennium Challenge Act of 2003; and
    (vii) A 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 PIA, 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) that are 
properly incurred in connection with the winding up of the Program 
within 120 days after the expiration, suspension or termination of this 
Compact, so long as the request for payment of such expenditures is 
submitted within ninety (90) days after such expiration, suspension or 
termination.
    (d) Subject to subsection (c) of this Section 5.1, upon the 
expiration, suspension or termination of this Compact, (i) any amounts 
of MCC Funding not disbursed by the MCC shall

[[Page 10481]]

be released from any obligation in connection with this Compact without 
any action from the Government or the 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 the MCC within thirty (30) days after the 
Government receives the MCC's request for such return.
    (e) The MCC may reinstate any suspended or terminated MCC Funding 
under this Compact if the 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, the MCC shall have 
the right to require that the Government repay to the 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 the MCC's request for repayment. The Government 
shall use national funds (and no MCC Funding or assets of the Program) 
to make such payment.
    (b) Notwithstanding any other provision in this Compact or any 
other agreement to the contrary, the 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 the 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 and 6.4 of this Compact shall 
survive the expiration, suspension or termination of this Compact.

Article 6. Compact Annexes; Amendments; Compact Status

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 8, such 
Articles 1 through 8 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 Compact Status

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

Section 6.5 Additional Instruments

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

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

Section 6.7 Exclusion Clause

    This Compact and the other Compact Documents (as defined below) and 
the performance by the Government of any of its obligations under this 
Compact or the other Compact Documents shall not be made unlawful or 
otherwise prevented, hindered or adversely affected by any laws of 
Tanzania that come into effect after the MCC and the Government sign 
this Compact.

Section 6.8 References to Laws, Regulations, Policies and Guidelines

    Each reference in this Compact, the PIA or any other agreement 
entered into in connection with this Compact, to a law, regulation, 
policy, guideline or similar document will, unless expressly set forth 
herein or therein, be construed as a reference to such law, regulation, 
policy, guidelines or similar document as it may, from time to time, be 
amended, revised, replaced, or extended and will include any law, 
regulation, policy, guidelines or similar document issued under or 
otherwise applicable or related to such law, regulation, policy, 
guidelines or similar document.

Article 7. Entry Into Force

Section 7.1 Domestic Requirements

    The Government shall take all steps necessary to ensure that (a) 
this Compact and the PIA and all of the provisions of this Compact and 
the PIA are valid and binding and are in full force and effect in 
Tanzania, and (b) no laws of Tanzania (other than the constitution of 
Tanzania), whether now or hereafter in effect, will take precedence or 
prevail over the terms of this Compact or the PIA.

Section 7.2 Conditions Precedent

    Before this Compact enters into force:
    (a) The Government and the MCC shall execute the PIA;
    (b) The Government shall deliver to the 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 the MCC) certifying that the Government has 
taken all steps required under Section 7.1;
    (ii) An opinion from the Attorney General of Tanzania, in form and 
substance satisfactory to the MCC, that states, among other things, (1) 
each of the Compact, the PIA and any other agreement entered into in 
connection with this Compact to which the Government and the MCC are 
parties (the ``Compact Documents'') have been duly authorized, executed 
and delivered by the Government, (2) each Compact Document and all of 
the provisions of each Compact Document are valid and binding and are 
in full force and effect in Tanzania, (3) each Compact Document has the 
status, if stipulated in such agreement, of an international agreement, 
(4) each Compact Document (and the execution, delivery and performance 
by the Government of each) does not and will not conflict with any 
other international agreement or obligation of the Government or any of 
the laws of Tanzania, and (5) MCA-Tanzania has been duly established as 
an independent accountable entity, is validly existing as an office of 
the Government, and has the power and authority to perform the 
functions and carry out the obligations contemplated by the Compact 
Documents; 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 the requirements of Section 7.1,

[[Page 10482]]

which the MCC may post on the MCC Web site or otherwise make publicly 
available; and
    (c) The MCC must determine that, after signature of this Compact, 
the Government has not engaged in any action or omission that is 
inconsistent with the eligibility criteria for MCC Funding.

Section 7.3 Date of Entry Into Force

    This Compact 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'').

Article 8. Consultations

Section 8.1 Consultation

    Either Party may, at any time, request consultations relating to 
the interpretation or implementation of this Compact or any relevant 
supplemental agreement between the Parties. Such consultations shall 
begin at the earliest possible date. The request for consultations 
shall designate a representative for the requesting Party with the 
authority to enter consultations and the other Party shall endeavor to 
designate a representative of equal or comparable rank. If such 
representatives are unable to resolve the matter within thirty (30) 
days from the commencement of the consultations, then each Party shall 
forward the consultation to the Principal Representative or such other 
representative of comparable or higher rank. The consultations shall 
last no longer than sixty (60) days from date of commencement. If the 
matter is not resolved within such time period, either Party may 
terminate this Compact pursuant to Section 5.1(a). The Parties shall 
enter any such consultations guided by the principle of achieving the 
Compact Goal in a timely and cost-effective manner and by the 
principles of international law. Any dispute arising under or related 
to this Compact shall be determined exclusively through the 
consultation mechanism set forth in this Section 8.1.
    In Witness Whereof, the undersigned, duly authorized by their 
respective governments, have signed this Compact this 17th day of 
February, 2008.
    Done at Dar es Salaam, Tanzania.
    For Millennium Challenge Corporation, on behalf of the United 
States of America, George W. Bush, President of the United States of 
America.
    For the Government of the United Republic of Tanzania, Jakaya 
Mrisho Kikwete, President of the United Republic of Tanzania.

Annex I Program Description

A. Overview

    This Annex I to this Compact describes the Program that MCC Funding 
will support in Tanzania during the Compact Term. The Program will 
include the Transport Sector Project, the Energy Sector Project and the 
Water Sector Project (each, a ``Project'') and the activities related 
to the Projects (each, a ``Project Activity'') as described in this 
Annex I.
1. Background
    The United Republic of Tanzania (``Tanzania''), comprised of the 
mainland and Zanzibar, is surrounded by eight countries (consisting of 
Kenya, Uganda, Rwanda, Burundi, Democratic Republic of Congo, Zambia, 
Malawi, and Mozambique) and the Indian Ocean. Tanzania is a country of 
approximately 39 million people. Nearly 36 percent of the mainland 
population and 49 percent of the Zanzibar population live below the 
poverty line. An inadequate transportation network, an inadequate and 
unreliable supply of energy and a shortage of potable water are three 
key constraints to economic growth and private investment in Tanzania. 
The Program is designed specifically to address these constraints.
2. Program
    The Program consists of the Transport Sector Project, the Energy 
Sector Project, and the Water Sector Project, as further described 
below.
    The Parties may agree to modify or eliminate any Project or Project 
Activity, or to create a new project or project activity, 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 Project Activity, or creation of a new 
project or project activity, 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
    The consultative process for the Program was informed by, and 
anchored in, the consultative process conducted in connection with the 
Government's National Strategy for Growth and Reduction of Poverty 
which was finalized in 2005 (commonly referred to by the Swahili 
acronyms ``MKUKUTA'' and ``MKUZA,'' for the mainland and Zanzibar, 
respectively). The Government organized national outreach activities 
and held various meetings relating to the Program proposal with key 
stakeholders, including representatives from local governments, members 
of parliament, and non-governmental organizations. The Government also 
engaged the media to inform the public about the proposal for 
Millennium Challenge Account assistance with a series of press 
releases, radio and television interviews, and press conferences.
4. Environmental and Social Sustainability
    Tanzania enjoys a complex and rich environmental and social 
resource base. In order to achieve long-term sustainable growth and to 
achieve maximum Program impact, these natural resources (including 
abundant wildlife and ecological diversity, cultural resources, and 
coastal and marine life) will be safeguarded through the implementation 
of several programmatic and sectoral mitigation measures for the 
Compact Term, as follows:
    (a) The Government shall comply with MCC Environmental Guidelines 
and the gender policy delivered by the MCC to the Government or posted 
on the MCC Web site or otherwise publicly made available (the ``MCC 
Gender Policy''). The Government also shall adhere to Tanzanian 
environmental laws and regulations, including the Government of 
Tanzania National Environmental Policy of 1997, the 2004 Environmental 
Management Act, and the 2005 Environmental Impact Assessment and Audit 
Regulations. In addition, for projects on Zanzibar, the Government 
shall ensure that all implementing entities comply with the 1992 
National Environmental Policy for Zanzibar and the Environmental 
Management for Sustainable Development Act (No. 2 of 1996).
    (b) On-Going Consultation. To ensure the environmental and social 
sustainability of the Program, MCA-Tanzania shall develop and implement 
plans for comprehensive public consultations in which various 
stakeholders in the Program (including

[[Page 10483]]

women and other underrepresented groups) are afforded meaningful 
consultation and opportunities to provide their inputs to the design 
and implementation of the Program, which public consultations will 
primarily be conducted by the special consultative committees described 
in Section 2(c) of part E of this Annex I. In compliance with the MCC 
Environmental Guidelines, all environmental and social impact 
assessments (``ESIAs'') and all other relevant environmental and social 
assessment documentation will be posted on the MCA-Tanzania Web site.
    (c) Gender Integration Action Plan. To maximize the positive social 
impacts of the Program, MCA-Tanzania shall develop and implement a 
gender integration plan (for both the mainland and Zanzibar) that 
includes, among other things, approaches for meaningful and inclusive 
consultations with women and other underrepresented groups, a gender 
analysis for each Project Activity, as appropriate, and strategies for 
incorporating findings of the gender analysis into the design of each 
such Project Activity (the ``Gender Integration Action Plan''). The 
Gender Integration Action Plan will be posted on the MCA-Tanzania Web 
site.
    (d) HIV/AIDS Awareness. MCA-Tanzania shall develop and implement an 
action plan for incorporating targeted HIV/AIDS awareness programs into 
all phases of implementation of the Program. Such action plan 
specifically shall ensure (i) the incorporation of the HIV/AIDS 
awareness programs into the terms of reference (and the bidding 
documents) for the relevant contractors (including design or 
supervisory firms, construction firms, independent technical auditing 
firms and any project management advisors) and (ii) independent 
monitoring of each such contractor's compliance with these awareness 
programs throughout the Compact Term.
    (e) Capacity Building; Resource Management. MCC Funding may be 
used:
    (i) To provide capacity building to the National Environmental 
Management Council (``NEMC'') and the Zanzibar Department of 
Environment (``ZDOE'') in order (1) to enhance both NEMC's and ZDOE's 
abilities to address issues arising in connection with the 
implementation of the Program and (2) to support MCA-Tanzania's hiring 
of an environmental and social oversight consultant to assist MCA-
Tanzania in ensuring their compliance with various environmental and 
social requirements under the Compact; and
    (ii) To support community-based natural resource and wildlife 
management programs being undertaken by other donors, particularly 
where deforestation, wildlife migration and trafficking risks have been 
identified as possible in connection with the implementation of certain 
Project Activities.
    (f) Mitigation Measures. MCC Funding will be used to implement all 
environmental and social mitigation measures identified in the relevant 
environmental assessments (or as otherwise may be appropriate) of the 
Program, including (i) up to a maximum amount specified by the MCC, 
compensation for physical and economic displacement of individuals, 
residences and businesses affected by the rehabilitation, consistent 
with the World Bank's Operational Policy 4.12, (ii) implementation of 
HIV/AIDS awareness plans, and (iii) continuing advocacy, training and 
support for community-based resource management.
5. Proposals
    Public solicitations for proposals are anticipated to procure 
goods, works and services, as appropriate, to implement all Projects. 
MCA-Tanzania will develop, subject to MCC approval, a process for 
consideration of all such proposals. Notwithstanding the foregoing, 
MCA-Tanzania also may consider, using a process developed by MCA-
Tanzania and approved by the MCC, any unsolicited proposals it 
receives.

B. Transport Sector Project

1. Background
    Transportation infrastructure in Tanzania is inadequate to meet the 
needs of the country's widely dispersed population; less than seven 
percent of Tanzania's roads are bitumen surfaced, with the remainder 
gravel or earth. The Transport Sector Project addresses this constraint 
to growth by reducing transport costs and travel times, which will 
facilitate access to social services and markets and will increase 
tourism potential. Additionally, in areas where the roads are currently 
impassable for certain parts of the year, road rehabilitation will 
provide year-round access to markets, thus facilitating increased 
agricultural activity.
    Similarly, access to Mafia Island is limited by the poor condition 
of its airport and lack of feasible alternative transportation options. 
Resurfacing the airport's runway and improving other airport facilities 
will allow for easier, more efficient, and safer access to the island, 
resulting in increased tourist and business travel to and from the 
mainland and additional jobs on the island.
2. Project
    The Transport Sector Project consists of the following Project 
Activities:
    (a) Mainland Trunk Roads Activity.
    MCC Funding will be used to make improvements to three trunk roads 
on the mainland. Improvement of any such trunk roads will only be 
undertaken under this Compact and funded with MCC Funding if all 
necessary construction and construction supervision contracts for such 
trunk road are executed and in effect prior to the first anniversary of 
the entry into force of this Compact. Specifically, MCC Funding will 
support:
    (i) Rehabilitation of the following three trunk roads:
    (1) Tanga--Horohoro Road. Upgrading from gravel to asphalt concrete 
of the 68 km stretch of highway located in northeast Tanzania 
connecting the seaport of Tanga with Horohoro at the Kenyan border;
    (2) Tunduma--Sumbawanga Road. Upgrading from gravel to double 
bituminous surfacing of the southernmost 224 km stretch of the T9 trunk 
road (known as the western corridor), with the exception of the 
approximately two km stretch in Tunduma and the approximately eight km 
stretch in Sumbawanga, both of which will be paved with asphalt 
concrete; and
    (3) Mtwara Corridor. Upgrading from earth to double bituminous 
surfacing two sections of the Mtwara Corridor (known as the southern 
corridor) consisting of (A) the 61 km stretch between Namtumbo and 
Songea and (B) 78 km stretch from Peramiho Junction (that is about 20 
km west of Songea) to Mbinga.
    (ii) Construction supervision of all rehabilitated roads under the 
Mainland Trunk Roads Activity.
    (iii) Additional environmental assessments, together with any 
resulting resettlement action plans (``RAPs'') (consistent with World 
Bank Operational Policy 4.12) and environmental management plans 
(``EMPs''), each as satisfactory to the MCC, and wildlife migration 
studies and aforementioned community-based natural resource and 
wildlife management programs, as needed.
    (iv) Capacity building for the Tanzania National Road Agency 
(``TANROADS'') related to new staff and equipment required to manage 
the Mainland Trunk Roads Activity.
    (v) Assistance to TANROADS in preparation of design documentation 
and bid packages.

[[Page 10484]]

    TANROADS will be the Implementing Entity (as defined below) for the 
Mainland Trunk Roads Activity.
    (b) Zanzibar Rural Roads Activity.
    MCC Funding will be used to make improvements to selected rural 
roads on the Zanzibar island of Pemba. Specifically, MCC Funding will 
support:
    (i) Feasibility studies, final design, and any additional 
environmental and social assessments, together with any resulting RAPs 
(consistent with World Bank Operational Policy 4.12) and EMPs, each as 
needed and as satisfactory to the MCC, of the following five roads 
(each identified together with its approximate length): (1) Mzambarauni 
Takao--Finya Road (8.3 km), (2) Mzambarauni Karimu--Mapofu Road (8.3 
km), (3) Bahanasa--Daya-Mtambwe Road (13.1 km), (4) Chwale--Kojani Road 
(two km) and (5) Kipangani--Kangagani Road (three km).
    (ii) Rehabilitation and posting of signage and incorporation of 
other safety improvements of the roads selected from the five roads 
described in Section 2(b)(i) above based on, among others, technical 
construction plans capable of being completed during the Compact Term, 
reasonable conformity to the priorities of Zanzibar's transportation 
master plan, and an economic rate of return methodology acceptable to 
the MCC (agreed upon between the Parties prior to the commencement of 
any feasibility study described in Section 2(b)(i) above).
    (iii) Project management and construction supervision of all 
rehabilitated roads under the Zanzibar Rural Roads Activity.
    An engineering firm will be hired, following an international 
competitive procurement and selection process, to implement this 
Project Activity. The Government will ensure that the Ministry of 
Communications and Transport of Zanzibar cooperates with MCA-Tanzania 
to oversee this selected firm.
    (c) Road Maintenance Activity.
    MCC Funding will be used to enhance Tanzania's capacity to maintain 
its road network. Specifically, MCC Funding will support priority 
institutional and capacity limitations, as identified and agreed to by 
the MCC and the Government prior to the second anniversary of the entry 
into force of this Compact. Such support may be provided, among other 
ways, in improvements of strategic maintenance planning, and management 
of routine and periodic maintenance contracts of TANROADS and the 
Ministry of Communication and Transport of Zanzibar.
    (d) Mafia Island Airport Activity.
    MCC Funding will be used to rehabilitate and upgrade the airport on 
Mafia Island. MCC Funding will support:
    (i) Refurbishment of the runway, apron and taxiway, establishment 
of boundary security, refurbishment of the fire station, refurbishment 
of the terminal building and its water supply, and installation of 
communication equipment, the scale and scope of which will be 
contingent on the findings of a strategic environmental assessment.
    (ii) Project coordination and construction supervision for the 
activities described in Section 2(d)(i) above.
    (iii) Additional environmental assessments, together with any 
resulting RAPs (consistent with World Bank Operational Policy 4.12) and 
EMPs, each as needed and as satisfactory to the MCC.
    (iv) Capacity building at the Tanzania Airports Authority (``TAA'') 
related to improvements in strategic maintenance planning and 
management of routine and periodic maintenance contracts.
    TAA will be the Implementing Entity for the Mafia Island Airport 
Activity.
3. Beneficiaries
    The upgrading of mainland and Zanzibar roads will benefit users of 
the roads directly by reducing transportation costs and travel times. 
In addition, individuals living near the roads will indirectly benefit 
from increased access to social services and markets. The improvements 
to the Mafia Island airport will directly benefit approximately 12,000 
passengers traveling to the island each year, while indirectly 
benefiting the population of the island, particularly those engaged in 
the service sector.
4. Donor Coordination; Role of Private Sector and Civil Society
    The MCC, together with the Government, will continue to pursue 
opportunities to coordinate with the ``Joint Technical Committee,'' the 
principal development partner for projects in the transportation sector 
in Tanzania, consisting of representatives from the European Union, 
World Bank, African Development Bank (``AfDB'') and the governments of 
Norway, Denmark and Japan. The mainland roads included in the Transport 
Sector Project originated in the Government's ten-year ``Transport 
Sector Investment Program'' (also known as ``TSIP''), which has been 
reviewed, discussed and approved by the Joint Technical Committee and 
other stakeholders.
    The implementation of the Mafia Island Airport Activity will be 
coordinated with the feasibility study, the ESIA and design for 
Tanzanian airport upgrades (including airside pavements and other 
facilities) currently being funded by the World Bank.
    Private sector firms are expected to participate in the bids, and 
perform, studies, design, construction, and construction supervision 
associated with the Transport Sector Project.
5. United States Agency for International Development (``USAID'')
    While the USAID currently does not focus specifically on Tanzania's 
transportation sector, the MCC and the USAID, with the cooperation of 
the Government, will work to identify potential opportunities for 
coordination on the Transport Sector Project, including opportunities 
for community-based natural resource and wildlife management programs 
within those regions affected by roads rehabilitated under the 
Transport Sector Project.
6. Sustainability
    In order to provide continued institutional support for the 
Transport Sector Project, the Government will undertake certain 
commitments described in Section 7 below. The Road Maintenance Activity 
will enhance the Transport Sector Project's sustainability by improving 
the Government's capability to perform maintenance (both on the 
mainland and on Zanzibar). The Government is expected to commit 
additional resources to maintain the roads rehabilitated under the 
Transport Sector Project. While it is unlikely that the Transport 
Sector Project will result in any significant negative environmental 
and social impacts, the potential direct, indirect, induced, and 
cumulative environmental impacts of the Transport Sector Project will 
be examined through the execution of appropriate environmental 
assessments to be conducted during the final design phase of the 
Project Activities of the Transport Sector Project, and appropriate 
mitigation measures will be implemented. The Mafia Island Airport 
Activity will be subject to the results of a strategic environmental 
assessment. This assessment will help ensure that all MCC investments 
in the airport result in improved conditions for tourism and private 
sector growth and are implemented in the context of sustainable long-
term development with a focus on natural resource and wildlife 
management.

[[Page 10485]]

7. Policy, Legal and Regulatory Reforms
    The implementation by the Government, to the satisfaction of the 
MCC in its discretion, of the policy, legal and regulatory reforms 
described below shall be conditions precedent to the specified 
Disbursements.
    (a) Prior to the initial disbursement of MCC Funding for the 
Mainland Roads Activity, the National Road Act (as submitted to the 
President for Signature in July 2007) shall have been enacted, and is 
in full force and effect, and the National Road Safety Policy and 
Strategy (in form and substance as prepared by the Ministry of 
Infrastructure Development in May 2007) shall have been adopted by the 
Government.
    (b) In the interest of long-term sustainability of the mainland 
roads network, the Government's expenditures for road maintenance shall 
be increased each Tanzanian fiscal year during the Compact Term, which 
increase will take into account inflation and maintenance needs of 
existing, improved and newly constructed roads.
    (c) In the interest of long-term sustainability of the Zanzibar 
roads network, the Government of Zanzibar's expenditures for road 
maintenance shall be increased each Tanzanian fiscal year during the 
Compact Term, which increase will take into account inflation and 
maintenance needs of existing, improved and newly constructed roads.
    (d) Prior to the initial disbursement of MCC Funding for 
construction on the Mainland Roads Activity, the Government shall 
finalize the TSIP or any shorter-term plan based on the TSIP acceptable 
to the Joint Technical Committee that provides funding priority to 
those projects identified in the TSIP.
    (e) Prior to the initial disbursement of MCC Funding for 
construction on the Mainland Roads Activity, the Government shall 
prepare and begin implementation of a plan, in consultation with the 
Joint Technical Committee, for future legislative reform in the 
transportation sector, including the increased autonomy of TANROADS.

C. Energy Sector Project

1. Background
    Tanzania has one of the lowest electrification rates in the world, 
with only about ten percent of the population benefiting from electric 
power service. Where electricity is available, the quality of supply is 
poor and blackouts and service interruptions are common. Consequently, 
businesses, individuals, and service providers suffer from the lack of 
access to reliable, affordable and modern energy services. The Energy 
Sector Project aims to improve the quality and increase the quantity of 
electricity to businesses and households, thereby increasing investment 
potential. The Energy Sector Project will add new supply and 
transmission capacity to improve reliability and quality of energy and 
new distribution capacity to extend access to electricity to 
communities and businesses not currently served with electricity.
2. Project
    The Energy Sector Project consists of the three Project Activities 
described below. Tanzania Electric Supply Company Limited (``TANESCO'') 
will be the Implementing Entity for each Project Activity of the Energy 
Sector Project. For the Zanzibar Interconnector Activity, TANESCO will 
coordinate and consult with Zanzibar Electricity Corporation 
(``ZECO'').
    (a) Zanzibar Interconnector Activity.
    MCC Funding will be used to increase the electric power supply to 
Zanzibar's Unguja Island by laying a submarine transmission cable, to 
make associated investments to increase the capacity of certain 
overhead transmission lines and to rehabilitate the main substation 
near Zanzibar Town. Specifically, MCC Funding will support:
    (i) Final design, and an environmental assessment, together with 
any resulting RAPs (consistent with World Bank Operational Policy 4.12) 
and EMPs, each as needed and as satisfactory to the MCC, and 
occupational health and safety standards.
    (ii) Construction and installation of an approximately 40 km-long, 
132kV, 100MW capacity submarine electric transmission cable (including 
telecom fiber optic shield wire) from Ras Kiromoni on the mainland to 
Ras Fumba on Unguja Island.
    (iii) Installation of a 132kV switchgear at Ubungo substation and 
laying of an approximately 20 km-long, supplementary 132kV overhead 
line along an existing transmission line from Ubungo to Ras Kiromoni.
    (iv) Laying of an approximately 22 km-long, supplementary 132kV 
overhead line along an existing transmission line from Ras Fumba to 
Mtoni substation.
    (v) Adding 120MVA of 132/33kV transformation capacity to the Mtoni 
substation on Unguja Island.
    (vi) Capacity building and technical support for TANESCO and ZECO, 
including assistance with preparation of engineering design and bidding 
documents, tender review, supervision of construction, project 
management, and quality control.
    (vii) Project coordination and construction supervision of all 
improvements and upgrades under the Zanzibar Interconnector Activity.
    (b) Malagarasi Hydropower and Kigoma Distribution Activity.
    MCC Funding will be used to construct a small (up to eight MW) run-
of-river hydropower plant on the Malagarasi River at Igamba Falls, and 
to construct a transmission and distribution network along the Kigoma, 
Uvinza and Kasulu corridor to serve approximately 21,000 customers. 
Specifically, MCC Funding will support:
    (i) Final design, and supplemental environmental and social 
assessments consistent with the sustainability issues identified below, 
together with any resulting RAPs (consistent with World Bank 
Operational Policy 4.12) and EMPs, each as needed and as satisfactory 
to the MCC, and occupational health and safety standards.
    (ii) Engineering and construction of (1) civil works including an 
approximately 24 km access road, a 300 m long concrete faced rockfill 
dam (of which about 200 m will be eight m high), and an approximately 
650 m long headrace canal, (2) electro-mechanical works including the 
powerhouse consisting of turbines, eight MW of power generators and a 
voltage step-up substation, and (3) hydro-mechanical works including 
intake gates, bottom outlets, and two steel penstocks (estimated to be 
110 m long).
    (iii) Engineering and construction of (1) transmission and 
distribution line extensions including up to 392 km of 33kV 
distribution lines, ten km of 11kV lines, and 171 km of low voltage 
lines to distribute power generated at the hydropower plant described 
in this Section 2(b) to Kigoma, Uvinza, Kasulu and small settlements 
along the corridor, and (2) associated upgrades including step-down 
substations, electrical protection and related minor civil works.
    (iv) Capacity building and technical support for TANESCO, including 
assistance with preparation of the engineering design and bidding 
documents, tender review, supervision of construction, project 
management, and quality control.
    (v) Project coordination and construction supervision of all 
improvements and upgrades under the Malagarasi Hydropower and Kigoma 
Distribution Activity.
    (vi) Assessment and design of a public-private partnership for the 
independent operation of the mini-grid

[[Page 10486]]

system in Kigoma which includes the hydropower plant, transmission and 
distribution network, and service delivery, and competitive procurement 
of an operator concessionaire.
    (c) Distribution Systems Rehabilitation and Extension Activity.
    MCC Funding will be used to rehabilitate existing power 
distribution assets and to extend the distribution network in six 
regions (consisting of Mwanza, Iringa, Mbeya, Dodoma, Tanga and 
Morogoro) to serve approximately 215,000 customers. Specifically, MCC 
Funding will support:
    (i) Final design, and environmental and social assessment 
frameworks, together with any resulting RAPs (consistent with World 
Bank Operational Policy 4.12) and EMPs, each as needed and as 
satisfactory to the MCC, and occupational health and safety standards.
    (ii) Construction of up to 247 distribution line extensions 
consisting of new 33kV, 11kV, and low voltage lines and customer 
connections in the six regions.
    (iii) Reinforcement and rehabilitation of up to 22 substations in 
the six regions, including new and replacement transformers and 
switchgear.
    (iv) Capacity building and technical support for TANESCO, including 
assistance with preparation of the engineering design and bidding 
documents, tender review, supervision of construction, project 
management, and quality control.
    (v) Project coordination and construction supervision of all 
improvements and upgrades under the Distribution Systems Rehabilitation 
and Extension Activity.
3. Beneficiaries
    The total number of beneficiaries of the Energy Sector Project by 
2020 is estimated to be 252,000 households and businesses receiving 
better quality and availability of electricity, as well as 
approximately 88,000 previously un-served households and businesses 
receiving electricity for the first time.
    The Malagarasi Hydropower and Kigoma Distribution Activity is 
expected to directly benefit approximately 13,000 newly served 
households and businesses by 2020 through new connections to the 
electricity grid; an additional 7,000 households, businesses and 
institutions (such as port operations, fish and agricultural processing 
facilities, tourism facilities, and a hospital) are likely to benefit 
from power that is more available and reliable, less costly, and of 
better quality. In addition, the Distribution Systems Rehabilitation 
and Extension Activity is expected to reach approximately 47,000 
beneficiaries through newly served households and businesses by 2020 
and 187,000 beneficiaries through existing households and businesses. 
Agricultural processing, small-scale retail and the service industry 
(such as commercial retailers and restaurants) are among the main 
sectors that will benefit from the availability of increased, more 
reliable, and better quality power supply. The Zanzibar Interconnector 
Activity is expected to provide significant benefits to energy 
consumers in Unguja and to assist growth in its vital tourism sector.
4. Donor Coordination; Role of Private Sector and Civil Society
    Donors, including the governments of Sweden, Norway, Japan, the 
World Bank and the AfDB, among others, play an active role in improving 
Tanzania's energy sector through technical assistance and 
infrastructure projects. The Energy Sector Project has benefited 
significantly from these donors' activities. For example, the 
Malagarasi hydropower plant project benefited from a pre-feasibility 
study financed by the AfDB. The MCC's due diligence review of the 
Distribution Systems Rehabilitation and Extension Activity benefited 
from active support of the Swedish International Development 
Cooperation Agency and the World Bank.
    The Government has been engaged in an extensive consultative 
process that allowed civil society, along with the business community, 
to discuss local needs and priorities relating to the Energy Sector 
Project. Such consultation is expected to continue during the 
implementation of the Energy Sector Project.
5. USAID
    The USAID currently does not have activities specifically in 
Tanzania's energy sector. However, as appropriate, the MCC and the 
USAID, with the cooperation of the Government, will work to identify 
potential opportunities for coordination on the Energy Sector Project, 
especially in connection with community-based natural resource and 
wildlife management programs in proximity to the Project Activities of 
the Energy Sector Project.
6. Sustainability
    To enhance institutional sustainability of the Energy Sector 
Project, the Government will undertake certain reforms described in 
Section 7 below. Hiring of qualified engineering, design, construction 
and supervisory firms to implement the Energy Sector Project, and 
provision of necessary technical assistance to TANESCO is expected to 
contribute to the sustainability of the Energy Sector Project as well.
    While it is unlikely that the Energy Sector Project will result in 
any significant negative environmental impacts, the potential direct, 
indirect, induced, and cumulative environmental impacts of the Energy 
Sector Project will be examined through the execution of appropriate 
environmental assessments to be conducted during the final design phase 
of the Energy Sector Project, and will be addressed through 
implementation of appropriate mitigation measures. Specifically, 
potentially significant resettlement issues associated with the current 
transmission line design under the Zanzibar Interconnector Activity 
will be mitigated through rerouting of the cable through open or less 
densely populated areas. In addition, under the Malagarasi Hydropower 
and Kigoma Distribution Activity, detailed studies will be required to 
assess the impact of reduced water flows and determine minimum 
ecological flows, to assess needs for fish migration to spawning 
grounds, and to study water quality impacts and potential impacts of 
water-related diseases. Detailed access road alignments and 
distribution line alignments will be completed and assessed, and land 
acquisition needs confirmed to allow for the preparation of a RAP. 
Further study on the Malagarasi hydropower plant's relationship with 
other proposed hydropower and irrigation activities on the Malagarasi 
River and potential cumulative effects, if any, will be required, in 
addition to considerations of both upstream and downstream usage. The 
environmental assessment to be undertaken in connection with the 
Distribution Systems Rehabilitation and Extension Activity will include 
special attention to the Iringa site, in which some of the distribution 
lines will cross within the boundaries of the Ruaha National Park.
7. Policy, Legal and Regulatory Reforms
    The implementation by the Government, to the satisfaction of the 
MCC in its discretion, of the policy, legal and regulatory reforms 
described below shall be conditions precedent to the specified 
Disbursements.
    (a) An Electricity Act, agreeable to stakeholders including the 
MCC, is enacted and in full force and effect prior to the initial 
disbursement of MCC Funding for the Energy Sector Project.
    (b) The Government shall support TANESCO's corporate objective of

[[Page 10487]]

moving towards financial self-sufficiency through, at a minimum, tariff 
reform that reflects full cost recovery, prior to the initial 
disbursement of MCC Funding for the Energy Sector Project.
    (c) The Government shall ensure that the composition of TANESCO's 
board of directors is such that a majority of board members are 
independent and professional members, with private sector 
representation, prior to the initial disbursement of MCC Funding for 
the Energy Sector Project.

D. Water Sector Project

1. Background
    Tanzania faces a serious shortage of access to potable water, 
resulting in a high incidence of water-related diseases, decreased 
workforce productivity, and constrained business growth. The Water 
Sector Project includes investments in bulk water supply for two urban 
areas, Dar es Salaam and Morogoro, which investments will increase the 
quantity and reliability of potable water for domestic and commercial 
use. By increasing the volume of water supply, the Water Sector Project 
is expected to reduce the incidence of water-related disease, increase 
time available for productive activities including education, promote 
greater investments in physical capital, and, ultimately, lead to an 
increase in income.
2. Project
    The Water Sector Project consists of the three Project Activities 
described below. These Project Activities are expected, individually 
and jointly, to improve significantly the water supply to Dar es Salaam 
and Morogoro as described below.
    (a) Lower Ruvu Plant Expansion Activity.
    MCC Funding will be used to expand the capacity of the Lower Ruvu 
water treatment plant serving the Dar es Salaam area, from about 180 
million liters per day to approximately 270 million liters per day. 
Specifically, MCC Funding will support:
    (i) Feasibility studies, final design and an environmental and 
social assessment, together with any resulting RAPs (consistent with 
World Bank Operational Policy 4.12) and EMPs, each as needed and as 
satisfactory to the MCC, and occupational health and safety standards.
    (ii) Raw water system (e.g., grit chamber and pumps), treatment 
system (e.g., flow diversion chamber, crossflow clarifier, declining 
rate filters, and chemical feed facilities), treated water system 
(e.g., high service pump station and clearwell), power and controls 
system, and solid handling facility (e.g., sludge lagoon system).
    (iii) Capacity building and technical support for Dar es Salaam 
Water and Sewerage Authority (``DAWASA'').
    (iv) Project coordination and construction supervision of all 
improvements and upgrades under the Lower Ruvu Plant Expansion 
Activity.
    DAWASA will be the Implementing Entity for the Lower Ruvu Plant 
Expansion Activity.
    (b) Non-Revenue Water Activity.
    MCC Funding will be used to improve the system efficiencies of 
DAWASA through reduction of non-revenue water via reduction in physical 
leaks and commercial losses. Specifically, MCC Funding will support:
    (i) A comprehensive assessment of both (1) the locations and 
volumes of physical leaks and (2) billing and collection deficiencies 
and losses.
    (ii) An environmental assessment, together with any resulting RAPs 
(consistent with World Bank Operational Policy 4.12) and EMPs, each as 
needed and as satisfactory to the MCC.
    (iii) Preparation of a performance-based contract with, and a 
procurement of, a private operator that will implement the non-revenue 
water reduction program based on specific benchmarks established in the 
assessment described in Section 2(b)(i) above.
    (iv) Capacity building and technical support for Dar es Salaam 
Water and Sewerage Company (``DAWASCO'') and DAWASA pertaining to the 
performance-based contract described in Section 2(b)(iii) above and 
system-wide planning and operations.
    (v) Project coordination and construction supervision of all 
improvements and upgrades under the Non-Revenue Water Activity.
    DAWASA is expected to be the Implementing Entity for the Non-
Revenue Water Activity.
    (c) Morogoro Water Supply Activity.
    MCC Funding will be used to improve water supply in Morogoro and to 
help Morogoro Water and Sewarage Authority (``MORUWASA'') move towards 
achieving financial sustainability. Specifically, MCC Funding will 
support:
    (i) Revised master plan, feasibility studies, final design and an 
additional environmental assessment, together with any resulting RAPs 
(consistent with World Bank Operational Policy 4.12) and EMPs, each as 
needed and as satisfactory to the MCC.
    (ii) Rehabilitation of Mambogo water intake and water treatment 
plant, including a water treatment plant with approximate capacity of 
6,000,000 million liters per day, and associated works.
    (iii) Improvements of water transfer in the existing distribution 
network, including rehabilitation of Mafiga water treatment plant 
facilities, about 1.9 km of pressure main, and associated works.
    (iv) Capacity building and technical support for MORUWASA.
    (v) Project coordination and construction supervision of all 
improvements and upgrades under the Morogoro Water Supply Activity.
    MORUWASA will be the Implementing Entity for the Morogoro Water 
Supply Activity.
3. Beneficiaries
    The Water Sector Project is expected to benefit approximately 
616,000 households in Dar es Salaam and approximately 51,000 households 
in Morogoro by providing better quality and more reliable water supply. 
Businesses relying on network water will also benefit from these 
service improvements. Benefits from the Project Activities under the 
Water Sector Project include reductions in water-related disease, 
increased time available for productive activities such as labor and 
education, and increased investments in physical and human capital.
4. Donor Coordination; Role of Private Sector and Civil Society
    All the components of the Water Sector Project are priority 
projects identified under the Water Sector Development Program 2006-
2025 (``WSDP''). The WSDP was designed under the sector wide approach 
to planning with the objectives of equity of water access, water 
managment capacity, and proper maintenance of water and sanitation 
sytstems, use of environmentally sound technologies and effective water 
tariffs, billing and revenue collection mechanism. The donors 
participating in the WSDP include the governments of Germany, the 
Netherlands, France, and Japan as well as the United Nations 
Development Programme, the United Nations Children's Fund, Food and 
Agriculture Organization and the AfDB (collectively referred to as the 
``Development Partners Group--Water''). The MCC has been coordinating 
with the Development Partners Group--Water, and will continue to 
explore opportunities to use various features of the WSDP, to the 
maximum extent possible, in order to reduce transaction costs and avoid 
building parallel structures.

[[Page 10488]]

    Private sector firms are expected to participate in the bids, and 
perform, studies, design, construction, and construction supervision 
associated with the Water Sector Project.
5. USAID
    Various USAID projects in Tanzania include components related to 
the water sector, although no current USAID program is exclusively 
focused on the water sector. The USAID is actively engaged in water 
policy matters in Tanzania, including through the USAID's participation 
in the Development Partners Group--Water. The MCC expects to work with 
the USAID to identify potential opportunities for coordination with 
respect to the Water Sector Project.
6. Sustainability
    By strengthening and enhancing operations of the water and sewerage 
authorities in two major urban locations, the Water Sector Project 
seeks to enhance the sustainable operation of Tanzania's water sector. 
The water and sewerage authorities will be required to submit rate 
cases aimed at achieving operational and maintenance financial 
sustainability within the Compact Term and a sustainable trend for 
recovery of asset depreciation. While it is unlikely that the Water 
Sector Project will result in any significant negative environmental 
impacts, the potential direct, indirect, induced, and cumulative 
environmental impacts of the Water Sector Project will be examined 
through the execution of appropriate environmental assessments to be 
conducted during the final design phase of the Water Sector Project, 
and appropriate mitigation measures will be implemented. For those 
Project Activities of the Water Sector Project that relate to water 
supply, MCA-Tanzania will ensure that feasibility studies include 
efforts to identify the most appropriate and environmentally 
sustainable water sources to meet future demand and are available to 
the poor. In addition, MCA-Tanzania will ensure that EMPs are 
developed, implemented and monitored for all Project Activities of the 
Water Sector Project, each in accordance with the provisions of this 
Compact and any relevant supplemental agreements. MCA-Tanzania also 
will pay particular attention to gender issues to support the 
sustainability and enhance the design of each Project Activity of the 
Water Sector Project through the Gender Integration Action Plan and 
final design.

E. 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. The MCC 
and the Government shall enter into the PIA, 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
    The MCC shall take all appropriate actions to carry out each of its 
responsibilities in connection with this Compact and the PIA, including 
the exercise of its approval rights in connection with the 
implementation of this Compact and the Program.
2. Government; MCA-Tanzania; Consultative Committees
    (a) The Government shall form an entity empowered to carry out the 
Government's obligations and to implement the Program under this 
Compact and the PIA (``MCA-Tanzania,'' which, as an institution of the 
Government, is, for the avoidance of doubt, included in the defined 
term ``Government''), and shall ensure that MCA-Tanzania takes 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 PIA.
    (i) Governing Board. MCA-Tanzania shall be governed by a governing 
board (``Governing Board'') that will have final decision-making 
authority over the implementation of the Program. The Governing Board 
shall consist of: seven representatives from the Government, including 
at least one representative of Zanzibar, and four representatives from 
the private sector and the civil society, at least one of whom shall 
represent an environmental non-governmental organization and at least 
one of whom shall be from Zanzibar. The private sector and civil 
society representatives shall be selected as the result of a 
transparent selection process approved by the MCC. The Governing Board 
composition shall be determined taking to account the need for gender 
balance among the Governing Board members.
    (ii) Secretariat. A secretariat (``Secretariat'') shall support the 
Governing Board in the implementation of the Program. A Chief Executive 
Officer will manage the day-to-day activities of MCA-Tanzania and will 
be supported by: (1) Deputy Chief Executive Officer (Tanzania 
mainland); (2) Deputy Chief Executive Officer (Zanzibar); (3) Director 
of Finance and Administration; (4) Director of the Transport Sector 
Project; (5) Director of the Energy Sector Project; (6) Director of 
Water Sector Project; (7) Director of Procurement; (8) Director of 
Environmental and Social Impact; (9) Director of Monitoring and 
Evaluation; (10) General Counsel; and (11) Internal Auditor; together 
with such other managers and officers as may be agreed upon by the 
Government and the MCC. The senior staff shall be supported by 
appropriate administrative personnel.
    (b) With prior written consent of the MCC, the Government may 
designate an entity to implement some or all of the Government's 
obligations or to exercise any rights of the Government under this 
Compact or the PIA. The Government's designation to an entity (whether 
MCA-Tanzania or otherwise) will not relieve the Government of any 
designated obligations and rights, for which the Government will retain 
full responsibility. For the avoidance of doubt, upon any such 
designation, any reference in this Compact, the PIA or any related 
agreement to an action or requirement of the Government or to an 
agreement to which the Government is a party shall be a reference to 
the Government and each such designated entity.
    (c) The Government shall establish special consultative committees 
that will continue the consultative process throughout the Compact 
Term. These special consultative committees shall be established 
satisfactory to the MCC and consistent with the MCC's Guidelines for 
Accountable Entities and Implementation Structures delivered by the MCC 
to the Government or posted on the MCC Web site or otherwise made 
publicly available. The members of each special consultative committee 
shall include non-governmental organizations, the private sector, civil 
society, and local and regional governments from the applicable region. 
The membership of these special consultative committees shall be 
determined taking to account the need for gender balance among the 
special consultative committee members and shall be agreed to between 
MCA-Tanzania and the MCC. Each special consultative committee shall 
provide advice and input to the Governing Board and the Secretariat 
regarding issues related to the implementation of the Program, shall 
meet regularly (in a format and on a schedule to be agreed to between 
the MCC and the Government) and shall receive regular

[[Page 10489]]

Program updates from MCA-Tanzania. These special consultative 
committees will not have decision-making authority, but will serve as a 
mechanism for ongoing consultations between the Government and the 
public.
    (d) MCA-Tanzania may provide MCC Funding to one or more pre-
determined ministries, bureaus or agencies of the Government 
(``Implementing Entity'') based on their expertise to implement any 
Project, Project Activity or any of its components under an agreement 
that sets forth the responsibilities of such Implementing Entity and 
any other appropriate terms and conditions (``Implementing Entity 
Agreement'').
3. Banking Services, Fiscal Management and Procurement
    (a) The Government shall ensure that a bank (``Bank'') is 
appointed, and the Permitted Accounts are established and banking 
services provided, in accordance with the terms of this Compact and the 
PIA who will provide a broad range of banking services required by MCA-
Tanzania to implement the Program. The Government shall take all 
appropriate actions to ensure that the Bank perform these services in 
accordance with the terms of this Compact, the PIA 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 
with the Bank to be entered into between MCA-Tanzania and the Bank 
(``Bank Agreement'').
    (b) The Government shall ensure that a fiscal agent (``Fiscal 
Agent'') is appointed in accordance with the terms of this Compact and 
the PIA who will provide a broad range of financial management services 
required by MCA-Tanzania to implement the Program. The Government shall 
take all appropriate actions to ensure that the Fiscal Agent perform 
these services in accordance with the terms of this Compact, the PIA 
and any other agreements to which the Fiscal Agent is a party and in 
accordance with internationally accepted standards of accounting and 
financial management. The Government shall set out the roles and 
responsibilities of the Fiscal Agent in one or more agreements with the 
Fiscal Agent to be entered into between MCA-Tanzania and the Fiscal 
Agent (``Fiscal Agent Agreement'').
    (c) The Government shall ensure that one or more procurement agents 
(each, a ``Procurement Agent'') are appointed in accordance with the 
terms of this Compact and the PIA who will provide specified 
procurement activities required by MCA-Tanzania to implement the 
Program. The Government shall take all appropriate actions to ensure 
that each Procurement Agent perform these services in accordance with 
the terms of this Compact, the PIA 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 each Procurement Agent in one or more agreements 
with such Procurement Agent to be entered into between MCA-Tanzania and 
the Procurement Agent (``Procurement Agent Agreement'').

Annex II Program Budget

1. General

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

2. Modifications

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

                                      Multi-Year Financial Plan Summary \4\
                                                   [US$ '000]
----------------------------------------------------------------------------------------------------------------
                                           Year 1 +
                 Project                      CIF       Year 2      Year 3      Year 4      Year 5       Total
----------------------------------------------------------------------------------------------------------------
1. Transport
    A. Mainland Trunk Roads Activity....  ..........  ..........  ..........  ..........  ..........  ..........
    B. Zanzibar Rural Roads Activity....  ..........  ..........  ..........  ..........  ..........  ..........
    C. Road Maintenance Activity........  ..........  ..........  ..........  ..........  ..........  ..........
    D. Mafia Island Airport Activity....  ..........  ..........  ..........  ..........  ..........  ..........
        Sub-Total.......................      21,552      84,406     147,131      82,606      37,081     372,776
2. Energy
    A. Zanzibar Interconnector Activity.  ..........  ..........  ..........  ..........  ..........  ..........
    B. Malagarasi Hydropower & Kigoma     ..........  ..........  ..........  ..........  ..........  ..........
     Distribution Activity..............
    C. Distribution Systems               ..........  ..........  ..........  ..........  ..........  ..........
     Rehabilitation and Extension
     Activity...........................
        Sub-Total.......................      16,646      45,501      53,435      59,083      31,806     206,471
3. Water
    A. Lower Ruvu Plant Expansion         ..........  ..........  ..........  ..........  ..........  ..........
     Activity...........................
    B. Non-Revenue Water Activity.......  ..........  ..........  ..........  ..........  ..........  ..........
    C. Morogoro Water Supply Activity...  ..........  ..........  ..........  ..........  ..........  ..........
        Sub-Total.......................       5,845      16,959      17,786      16,838       8,908      66,336
4. Monitoring and Evaluation

[[Page 10490]]

 
        Sub-Total.......................       2,500       1,000       1,000       1,000       4,500      10,000
5. Program Administration and Audits
    A. Program Admin. (MCA-Tanzania)....  ..........  ..........  ..........  ..........  ..........  ..........
    B. Fiscal Agent Support.............  ..........  ..........  ..........  ..........  ..........  ..........
    C. Procurement Agent Services.......  ..........  ..........  ..........  ..........  ..........  ..........
    D. Audit............................  ..........  ..........  ..........  ..........  ..........  ..........
    E. Capacity Building and Technical    ..........  ..........  ..........  ..........  ..........  ..........
     Assistance.........................
        Sub-Total.......................      11,202       7,615       7,900       7,868       7,968      42,553
                                         -----------------------------------------------------------------------
            Total Estimated MCC               57,745     155,481     227,252     167,395      90,263    698,136
             Contribution...............
----------------------------------------------------------------------------------------------------------------
\4\ Costs indicated in the table above for all Project Activities under the relevant Projects include, as
  appropriate: engineering and environmental studies; implementation of EMPs and RAPs; technical assistance;
  coordination; contingencies; project management; and construction supervision.

Annex III Summary of Monitoring and Evaluation Plan

    This Annex III to this Compact (the ``M&E Annex'') generally 
describes the components of the monitoring and evaluation plan (the 
``M&E Plan'') for the Program. Each capitalized term in this Annex III 
shall have the same meaning given such term elsewhere in this Compact.

1. Overview

    The MCC and the Government (or a mutually acceptable Government 
affiliate or permitted designee) shall formulate, agree to and the 
Government shall implement, or cause to be implemented, an M&E Plan 
that specifies (a) how progress toward the Compact Goal and the Project 
Objectives will be monitored, (``Monitoring Component''), (b) process 
and timeline for the monitoring of planned, ongoing, or completed 
Project Activities to determine their efficiency and effectiveness, and 
(c) a methodology for assessment and rigorous evaluation of the 
outcomes and impact of the program (``Evaluation Component''). 
Information regarding the Program's performance, including the M&E 
Plan, and any amendments or modifications thereto, as well as progress 
and other reports, will be made publicly available on the MCA-Tanzania 
Web site and elsewhere.

2. Program Logic

    The Tanzania program monitoring and evaluation plan shall be built 
on the program logic model below, which is a graphical representation 
of the program showing the sequence of results and the causal links 
between outcomes, objectives, and ultimately the Compact Goal.
[GRAPHIC] [TIFF OMITTED] TN27FE08.027

    The Program's focus on infrastructure is an essential part of 
addressing Tanzania's development challenges in accordance with the 
MKUKUTA/MKUZA. The Transport Sector Project is based on the logic that 
improvements in the road network and airports can reduce transport 
costs to regional, national and international markets, thereby 
catalyzing growth in sectors that rely on good transportation links, 
such as agriculture and tourism. The Energy

[[Page 10491]]

Sector Project will provide reliable electricity to households and 
businesses, allowing for an increase in the scale and scope of 
productive activities and increased value added for businesses in 
project areas. The logic behind the Water Sector Project is that by 
increasing the supply of potable water for households, mortality and 
morbidity from water-related diseases will decrease, leading to 
increased investment human and physical capital. In addition, 
increasing the reliability of potable water should lead to increased 
investments in productive assets by business.

3. Monitoring Component

    (a) Indicators. The M&E Plan shall measure the results of the 
Program using quantitative, objective and reliable data 
(``Indicators''). Each Indicator will have one or more expected results 
that specify the expected value and the expected time by which that 
result will be achieved (``Target''). The M&E Plan will measure and 
report four types of Indicators. First, the Compact Goal Indicators 
(each, a ``Goal Indicator'') will measure the impact of the Program on 
the incomes of Tanzanians who participate or are covered by the Program 
(collectively, ``Beneficiaries''). Second, Objective Indicators (each, 
an ``Objective Indicator'') will measure the final results of the 
Projects in order to monitor their success in meeting the Project 
Objectives. Third, Outcome Indicators (each, an ``Outcome Indicator'') 
will measure the intermediate results of goods and services delivered 
under each Project in order to provide an early measure of the likely 
impact of the Projects on the Project Objectives. Fourth, Project 
Activity Indicators (each, an ``Activity Indicator'')(each of Goal 
Indicator, Objective Indicator, Outcome Indicator and Activity 
Indicator, an ``Indicator'') will measure the delivery of key goods and 
services in order to monitor the pace of Project Activity execution. 
For each Outcome Indicator, Objective Indicator, and Goal Indicator, 
the M&E Plan will define a strategy for obtaining and verifying the 
value of such Indicator prior to undertaking any activity that affects 
the value of such Indicator (such value, a ``Baseline''). All 
Indicators will be disaggregated by gender, income level and age, to 
the extent practicable. Subject to prior written approval from the MCC, 
MCA-Tanzania may add Indicators or refine the Targets of existing 
Indicators.
    (i) Goal Indicators. The M&E Plan shall contain the Goal Indicators 
listed in the table below, with their definitions, unit of measurement, 
baseline, and Year 5 with and without Projects.

----------------------------------------------------------------------------------------------------------------
                                              Goal level indicators
-----------------------------------------------------------------------------------------------------------------
                                                                                              Year 5     Year 5
           Result                Indicator        Definition          Unit        Baseline   without      with
                                                                                             project    project
----------------------------------------------------------------------------------------------------------------
Economic Growth.............  Regional GDP...  Regional GDP
                                                increase due
                                                to Transport
                                                Sector
                                                Project:
                                                  Mbeya and     US$ millions...     1275.9     1635.3     1645.3
                                                   Rukwa
                                                   regions
                                                   (Tunduma
                                                   Sumbawanga
                                                   road).
                                                  Tanga region  ...............      699.0      895.9      898.3
                                                   (Tanga
                                                   Horohoro
                                                   road).
                                                  Ruvuma        ...............      494.2      633.4      639.4
                                                   region
                                                   (Namtumbo-
                                                   Songea and
                                                   Peramiho
                                                   Mbinga
                                                   roads).
                                                  Zanzibar....  ...............      366.8      470.1      471.2
                                                  Pwani region  ...............      235.3      301.5      302.3
                                                   (Mafia
                                                   airport).
                              Regional GDP...  Regional GDP
                                                increase due
                                                to Energy
                                                Sector
                                                Project:
                                                  Kigoma......  US$ millions...      366.4      441.4      441.5
                                                  Tanga.......  ...............      657.0      842.0      842.9
                                                  Dodoma......  ...............      342.1      438.4      438.8
                                                  Morogoro....  ...............      615.1      788.3      789.1
                                                  Iringa......  ...............      618.1      792.2      793.0
                                                  Mwanza......  ...............      959.8     1230.2     1231.4
                                                  Mbeya.......  ...............      809.2     1037.0     1038.1
                                                  Zanzibar....  ...............      366.8      470.1      470.3
                              Regional GDP...  Regional GDP
                                                increase due
                                                to Water
                                                Sector
                                                Project:
                                                  Dar es        US$ millions...     1821.1     2483.3     2505.1
                                                   Salaam.
                                                  Morogoro....  ...............       75.3      102.7      103.1
----------------------------------------------------------------------------------------------------------------

    (ii) Objective and Outcome Indicators. The M&E Plan shall contain 
the following objective and outcome indicators to measure results at 
the Project level.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             Transport Sector Project Objective and Outcome Level Indicators
---------------------------------------------------------------------------------------------------------------------------------------------------------
               Result                       Indicator              Definition                 Unit                 Baseline                Year 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Objective Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increased cash crop revenue........  Cash-crop revenue.....  Tons of crops sold (in
                                                              price per ton in zone
                                                              of influence of
                                                              road):

[[Page 10492]]

 
                                                                Tunduma Sumbawanga.  US$ millions.........  58.2.................  67.8
                                                                Tanga Horohoro.....  .....................  1.35.................  1.48
                                                                Namtumbo-Songea and  .....................  41.0.................  50.7
                                                                 Peramiho Mbinga.
                                                                Zanzibar/Pemba.....  .....................  8.0..................  8.5
Increased aggregate spending by      Aggregate visitor          Sum of spending by   US$ millions.........  3.2..................  4.2
 visitors to Mafia Island.            spending \5\.              all visitors to
                                                                 Mafia Island.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Outcome Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Reduced vehicle operating costs and  International           Measurement of
 travel times.                        roughness index (IRI).  pavement roughness on
                                                              targeted roads:
                                                                Tunduma Sumbawanga.  m/km.................  14.3.................  2.5
                                                                Tanga Horohoro.....  .....................  14.5.................  2.5
                                                                Namtumbo-Songea and  .....................  16.0.................  2.5
                                                                 Peramiho Mbinga.
                                                                Zanzibar/Pemba.....  .....................  15.0.................  4.0
Increased traffic volume...........  Average annual daily    Number of vehicles by   vehicles               470..................  810
                                      traffic (AADT)          type on MCC-upgraded                          530..................  915
                                                              roads:                                        230..................  390
                                                             Tunduma Sumbawanga....                         110..................  180
                                                             Tanga Horohoro........                         26...................  49
                                                             Namtumbo-Songea.......
                                                             Peramiho Mbinga.......
                                                             Zanzibar/Pemba........
Increased air passenger traffic to   Passenger arrivals \6\  Number of passenger     passengers...........  12,000...............  16,000
 Mafia Island.                                                arrivals at Mafia
                                                              Island airport.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Energy Sector Project Objective and Outcome Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Objective Level Indicator
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increased value added to businesses  Value added...........  Profits plus wages of   US$..................  TBD..................  TBD
 in Kigoma, T&D target areas and                              enterprises,
 Unguja Island.                                               disaggregated by
                                                              Kigoma, T&D target
                                                              regions and Unguja
                                                              Island \7\.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Outcome Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increased quantity of electricity    Electricity (kWh) sold  Incremental amount of   MWh/year.............  TBD \9\..............  TBD
 sold.                                                        electricity sold, to
                                                              be disaggregated by
                                                              target region and
                                                              customer types \8\.
Increased number of power customers  New power customers...  Number of new           .....................
                                                              connections resulting
                                                              from MCC investment,
                                                              disaggregated by
                                                              target regions and
                                                              customer types:
                                                                Malagarasi           number...............  0....................  2,500
                                                                 Hydropower and
                                                                 Kigoma
                                                                 Distribution
                                                                 Activity.
                                                                Distribution         .....................  0....................  35,000
                                                                 Rehabilitation and
                                                                 Extension Activity.
                                                                Zanzibar             .....................  0....................  TBD
                                                                 Interconnector
                                                                 Activity.
Better quality power...............  Power quality.........  Frequency and           number and magnitude   TBD \6\..............  2% improvement over
                                                              magnitude of voltage    of voltage                                    baseline.
                                                              fluctuations (%         deviations/day.
                                                              deviation from
                                                              standard voltage
                                                              level each hour) at
                                                              primary substations
                                                              feeding target
                                                              regions/cities:
                                                                Malagarasi
                                                                 Hydropower and
                                                                 Kigoma
                                                                 Distribution
                                                                 Activity.
                                                                Distribution         .....................  .....................  .....................
                                                                 Rehabilitation and
                                                                 Extension Activity.

[[Page 10493]]

 
                                                                Zanzibar             .....................  .....................  .....................
                                                                 Interconnector
                                                                 Activity.
More reliable power................  Power reliability.....  Amount of energy (MWh)  MWh..................  TBD \6\..............  15% fewer than
                                                              not served to target                                                  baseline per year.
                                                              regions and customer
                                                              types, as a result of
                                                              T&D failure (for all
                                                              target regions) and
                                                              generation failure
                                                              (for Kigoma region):
                                                                Malagarasi           .....................  .....................  .....................
                                                                 Hydropower and
                                                                 Kigoma
                                                                 Distribution
                                                                 Activity.
                                                                Distribution         .....................  .....................  .....................
                                                                 Rehabilitation and
                                                                 Extension Activity.
                                                                Zanzibar             .....................  .....................  .....................
                                                                 Interconnector
                                                                 Activity.
                                     Power outage duration.  Duration of power       hours/month..........  TBD \6\..............  15% fewer than
                                                              outages disaggregated                                                 baseline per year.
                                                              by target regions and
                                                              customer types:
                                                             Malagarasi Hydropower
                                                              and Kigoma
                                                              Distribution
                                                              Activity:.
                                                             Distribution
                                                              Rehabilitation and
                                                              Extension Activity.
                                                             Zanzibar
                                                              Interconnector
                                                              Activity.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Water Sector Project
                                                         Objective and Outcome Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Objective Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Investment in physical capital.....  Value of household      Total value of          US$..................  TBD \10\.............  TBD
                                      assets.                 household assets.
Investment in human capital........  Average years of        Average years of        years................  TBD..................  TBD
                                      education completed.    education completed.
Reduced prevalence of water-related  Prevalence of diarrhea  Total number of         diarrhea cases.......  TBD..................  TBD
 diseases \11\.                       \8\.                    diarrhea cases:
                                                                Dar es Salaam......  .....................  .....................  .....................
                                                                Morogoro...........  .....................  .....................  .....................
                                     Prevalence of cholera.  Total number of         cholera cases........  TBD..................  TBD
                                                              cholera cases:
                                                             Dar es Salaam                                                         .....................
                                                             Morogoro                                                              .....................
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Outcome Level Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increased number of households       Number of households    Improved source for     households...........  TBD..................  TBD
 using improved water source.         using improved source   drinking water is
                                      for drinking water.     defined as (a) type
                                                              of source = household
                                                              connection (in-home
                                                              or in-yard), public
                                                              standpipe, (b) <30
                                                              minutes (go, wait,
                                                              collect and return),
                                                              (c) <400 meters, and
                                                              (d) supplied by
                                                              provider acting
                                                              within the regulatory
                                                              framework
                                                              (incorporates issues
                                                              of water quality and
                                                              tariffs/
                                                              affordability):
                                                             Dar es Salaam                                                         .....................
                                                             Morogoro                                                              .....................
Increased number of businesses       Number of businesses    Improved source         businesses...........  TBD..................  TBD
 using improved water source.         using improved water    comprises(a) business
                                      source.                 connection, (b) 24-
                                                              hours/day of supply
                                                              and (c) supplied by
                                                              provider acting
                                                              within the regulatory
                                                              framework
                                                              (incorporates issues
                                                              of water quality and
                                                              tariffs/
                                                              affordability):

[[Page 10494]]

 
                                                             Dar es Salaam                                                         .....................
                                                             Morogoro                                                              .....................
Increased per capita water           Volume of individual    Daily per capita water
 consumption.                         water consumption.      consumption by type
                                                              of primary water
                                                              source: in-home, in-
                                                              yard, neighbor's
                                                              yard, public tap,
                                                              other:
                                                                Dar es Salaam......  liters/capita/day....  in-home: 70..........  in-home: 150
                                                                                                            in-yard: 40..........  in-yard: 87
                                                                                                            neighbor's yard: 40..  neighbor's yard: 87
                                                                                                            public tap: 25.......  public tap: 87
                                                                                                            other: 10............  other: 54
                                                                Morogoro...........  .....................  in-home: 100.........  in-home: 150
                                                                                                            in-yard: 70..........  in-yard: 145
                                                                                                            neighbor's yard: 40..  neighbor's yard: 83
                                                                                                            public tap: 40.......  public tap: 83
                                                                                                            other: 25............  other: 25
--------------------------------------------------------------------------------------------------------------------------------------------------------
\5\ Reporting will be disaggregated by length of stay and visitor category: business, leisure and holiday (package and non-package), visiting friends
  and relative, government and other.
\6\ Reporting will be disaggregated by visitor category: business, leisure and holiday (package and non-package), visiting friends and relatives,
  government and other. Baseline and target are annual totals but data will be reported quarterly.
\7\ Target regions include: (1) Kigoma region (which includes towns of Kigoma, Kasulu and Uvinza); (ii) Mwanza, Tanga, Morogoro, Dodoma, Iringa and
  Mbeya for the Distrubiotn Rehabilitation and Extenstion Activity; and (iii) Unguja Island.
\8\ Target customer types include TI, T2, T3, T4 and T5 (different tariff categories).
\9\ Baseline figures will be estimated during Year 1 of Compact by TANESCO and ZECO. After Year 1 baseline is determined, TANESCO and ZECO will report
  annually on these indicators.
\10\ Baselines and targets will be established no later than the last quarter before construction begins.
\11\ Reporting will be disaggregated by age group and data will be collected montly. Monthly baselines will be established using 2007 administrative
  health data.

    (iii) Activity Indicators. Prior to any Disbursement for any 
Project Activity, the Implementing Entity of such Project Activity 
shall propose a set of Activity Indicators that is approved in writing 
by MCA-Tanzania and the MCC. The M&E Plan shall be amended to reflect 
the addition of such Indicators. The table below shows a notional list 
of Activity Indicators that the M&E Plan may contain.

----------------------------------------------------------------------------------------------------------------
             Result                  Indicator          Definition            Unit         Baseline     Year 5
----------------------------------------------------------------------------------------------------------------
                               Transport Sector Project--Activity Level Indicators
----------------------------------------------------------------------------------------------------------------
Mainland and Pemba roads         Kilometers of      Kilometers of
 rehabilitated.                   road upgraded.     road upgraded
                                                     from gravel or
                                                     earth to bitumen
                                                     pavement:
                                                    Tunduma            km...............           0       224.9
                                                     Sumbawanga.
                                                    Tanga Horohoro...  .................           0        65.7
                                                    Namtumbo-Songea    .................           0       139.0
                                                     and Peramiho
                                                     Mbinga.
                                                    Pemba Island.....  .................           0        34.7
Roads maintained...............  Road maintenance   Amount spent on    percent..........         TBD         TBD
                                  expenditures.      maintenance the
                                                     previous fiscal
                                                     year/Amount
                                                     budgeted for
                                                     maintenance for
                                                     the previous
                                                     fiscal year.
Mafia Island runway upgraded...  Percentage of      Percent of the     percent..........           0         100
                                  upgrade            Mafia Island
                                  completed.         airport runway
                                                     upgrading
                                                     completed.
----------------------------------------------------------------------------------------------------------------
                                Energy Sector Project--Activity Level Indicators
----------------------------------------------------------------------------------------------------------------
Additional MWh/day of energy     Energy generation  Daily energy       MWh/day..........           0          49
 generated.                                          generated at the
                                                     power plant and
                                                     transmitted to
                                                     the grid
                                                     (Kigoma).
Increased kVA of transmission    Transmission       Additional                            ..........
 capacity.                        capacity.          transmission
                                                     capacity (kVA)
                                                    Malagarasi         MVa..............           0          20
                                                     Hydropower and
                                                     Kigoma
                                                     Distribution
                                                     Activity
                                                    Distribution       .................           0         146
                                                     Rehabilitation
                                                     and Extension
                                                     Activity
                                                    Zanzibar           .................           0         120
                                                     Interconnector
                                                     Activity
Improved collection efficiency.  Collection         Monthly cash       percent..........    \12\ TBD
                                  efficiency.        collection/
                                                     Monthly invoices.
                                                    Malagarasi         .................  ..........          95
                                                     Hydropower and
                                                     Kigoma
                                                     Distribution
                                                     Activity

[[Page 10495]]

 
                                                    Distribution       .................  ..........          95
                                                     Rehabilitation
                                                     and Extension
                                                     Activity
                                                    Zanzibar           .................  ..........          95
                                                     Interconnector
                                                     Activity
Decreased technical and non-     Technical and non- (kWh received by   percent..........    \10\ TBD
 technical losses.                technical losses.  substation--kWh
                                                     billed)/(kWh
                                                     received by
                                                     substation).
                                                    Malagarasi         .................  ..........          15
                                                     Hydropower and
                                                     Kigoma
                                                     Distribution
                                                     Activity
                                                    Distribution       .................  ..........          15
                                                     Rehabilitation
                                                     and Extension
                                                     Activity
                                                    Zanzibar           .................  ..........          15
                                                     Interconnector
                                                     Activity
----------------------------------------------------------------------------------------------------------------
                                 Water Sector Project--Activity Level Indicators
----------------------------------------------------------------------------------------------------------------
Increased water supplied.......  Volume of water    Daily volume of    .................  ..........
                                  produced.          water produced
                                                     by treatment
                                                     facility.
                                                    Dar es Salaam....  m\3\/day.........     235,294     325,294
                                                    Morogoro.........  .................      18,000     300,000
Decreased non-revenue water....  Volume of non-     Volume of non-     .................  ..........
                                  revenue water.     revenue water
                                                     (disaggregated
                                                     by commercial
                                                     and physical
                                                     losses)/Volume
                                                     of water
                                                     produced.
                                                    Dar es Salaam....  percent..........          68          56
                                                    Morogoro.........  .................          40          32
Improved operations and          Operations and     (Total revenue--   percent..........         TBD          0
 maintenance cost recovery        Maintenance Cost   Routine and
 ratio.                           Recovery Ratio.    periodic
                                                     operations and
                                                     maintenance
                                                     expenses)/
                                                     Routine and
                                                     periodic
                                                     operations and
                                                     maintenance
                                                     expenses.
----------------------------------------------------------------------------------------------------------------
\12\ Baseline figures and annual targets will be developed during Year 1 of Compact by TANESCO and ZECO. After
  Year 1 baseline and annual targets are determined, TANESCO and ZECO will report annually on these indicators.

    (b) Data Collection and Reporting. The M&E Plan shall establish 
guidelines for data collection and a reporting framework, including a 
schedule of reporting requirements and responsible parties. The M&E 
Plan will use both qualitative and quantitative methods for data 
collection. The M&E Plan shall outline various data collection 
methodologies, assessments, and surveys necessary to report the results 
of all Indicators included in the M&E Plan. It will also draw 
quantitative information from the National Bureau of Statistics and 
other large household surveys.
    (c) Data Quality Reviews. From time to time, as determined in the 
M&E Plan or as otherwise requested by the MCC, the quality of the data 
gathered through the M&E Plan shall be reviewed by an independent third 
party to ensure that data reported are as valid, reliable, and timely 
as resources will allow. The objective of any data quality review will 
be to verify the quality and the consistency of performance data, 
across different implementation units and reporting institutions. Such 
data quality reviews also will serve to identify where those levels of 
quality are not possible, given the realities of data collection.
    (d) Management Information System. The M&E Plan shall describe the 
information system that will be used to collect data, store, process 
and deliver information to relevant stakeholders in such a way that the 
Program information is at all times accessible and useful to those who 
wish to use it. The system development will take into consideration the 
requirement and data needs of the components of the Program, and will 
be aligned with the MCC's existing systems, other service providers, 
and government ministries.

4. Evaluation Component

    The Evaluation Component of the M&E Plan shall detail the 
methodology, process, and timeline for analyzing the Program 
efficiency, effectiveness, impact, and sustainability. At a minimum, 
this component shall include at least two types of evaluations, an 
Impact Evaluation and a Final Evaluation. With the agreement of the 
MCC, the Evaluation Component also may include ad hoc evaluations and 
special studies. The cost of an independent evaluation or special study 
may be paid from MCC Funding.
    (a) Impact Evaluation. The MCC will engage an independent evaluator 
to conduct an impact evaluation of specific Project Activities that 
lend themselves to rigorous evaluation (``Impact Evaluation''). The 
Impact Evaluation will be designed using rigorous methods to address 
selection bias and attribution issues. It will also take into 
consideration the anticipated time lag for each Project to realize 
expected benefits. It is anticipated that the Impact Evaluation may 
extend beyond the Compact Term and flexibility of design should be a 
priority. The following table outlines the methodologies currently 
under consideration, which may be modified to accommodate changes in 
Program design. In all cases, the most rigorous method possible will be 
implemented.

--------------------------------------------------------------------------------------------------------------------------------------------------------
           Project/activity                Proposed methodology       Comparison group(s)                       Variables of interest
--------------------------------------------------------------------------------------------------------------------------------------------------------
Pemba Rural Road Upgrading............  Difference-in-difference   Households located in     Transport prices.
                                         using Propensity Score     communities affected by  Input and output prices for agricultural goods.
                                         Matching.                  NORAD road upgrades      Capital investment and employment figures.
                                                                    compared to households
                                                                    located in MCC-affected
                                                                    communities.

[[Page 10496]]

 
                                        .........................  Households living in      Migration patterns.
                                                                    communities without      Household health and income.
                                                                    anticipated road         School enrollment (especially for girls).
                                                                    upgrades during the
                                                                    Compact period compared
                                                                    to households located
                                                                    in MCC-affected
                                                                    communities.
Mainland Trunk Road Upgrading.........  Difference-in-difference   Individuals living along  Transport prices.
                                         using Propensity Score     recently upgraded trunk  Input and output prices for agricultural goods.
                                         Matching, or simple        roads compared to those  Capital investment and employment figures.
                                         difference-in-difference.  living along MCC-
                                                                    upgraded roads.
                                        .........................  Individuals living at     Migration patterns.
                                                                    least 2 kilometers from  Household health and income HIV/AIDS rates.
                                                                    any trunk road compared
                                                                    to those living along
                                                                    MCC-upgraded roads.
Expansion of Energy Distribution        Regression discontinuity.  Communities who receive   Improvements in health.
 Networks (Malagarasi Hydro and T&D                                 electricity early
 Activities).                                                       compared to those who
                                                                    receive electricity
                                                                    late in the Compact.
                                        .........................  Households who live at    Child schooling attainment (or at least intensity of
                                                                    the end of the            study).
                                                                    distribution line        Small-scale businesses using electricity.
                                                                    compared to those who
                                                                    live just beyond the
                                                                    end of the distribution
                                                                    line.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (b) Final Evaluation. MCA-Tanzania, with the prior written approval 
of the MCC, will engage an independent evaluator to conduct an 
evaluation at the expiration or termination of this Compact Term 
(``Final Evaluation'') or at the MCC's election, the MCC will engage 
such an independent evaluator. The Final Evaluation must at a minimum 
evaluate the efficiency and effectiveness of the Program and provide 
lessons learned that may be applied to similar projects.
    (c) Ad Hoc Evaluations and Special Studies. The M&E Plan shall 
identify and make provision for special studies, ad-hoc evaluations, 
and research that may be needed as part of the monitoring and 
evaluating of this Compact. Either the MCC or MCA-Tanzania may request 
special studies or ad-hoc evaluations of Projects, Project Activities, 
or the Program as a whole prior to the expiration of this Compact Term. 
If MCA-Tanzania engages an evaluator, the evaluator will be an 
externally contracted independent source selected by MCA-Tanzania, 
subject to the prior written approval of the MCC, following a tender in 
accordance with the MCC Program Procurement Guidelines, and otherwise 
in accordance with any relevant Implementation Letter or supplemental 
agreement.

5. Other Components of the M&E Plan

    In addition to the Monitoring and 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) Coordination of data collection. Efforts to synchronize data 
collection with relevant national initiatives including the WSDP 
performance monitoring framework, MKUKUTA monitoring plan and the MKUZA 
monitoring plan.
    (b) M&E Budget. A detailed cost estimate for all components of the 
M&E Plan.
    (c) Assumptions and Risks. Any assumptions and risks external to 
the Program that underlie the accomplishment of the Project Objectives 
and Project Activity Outcomes; provided, however, that such assumptions 
and risks shall not excuse performance of the Parties, unless otherwise 
expressly agreed to in writing by the Parties.

 [FR Doc. E8-3661 Filed 2-26-08; 8:45 am]
BILLING CODE 9211-03-P