[Federal Register Volume 75, Number 19 (Friday, January 29, 2010)]
[Notices]
[Pages 4849-4875]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-1944]


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MILLENNIUM CHALLENGE CORPORATION

[MCC FR 10-04]


Notice of Entering Into a Compact With the Republic of Moldova

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 
Republic of Moldova. Representatives of the United States Government 
and the Republic of Moldova executed the Compact documents on January 
22, 2010.

    Dated: January 26, 2010.
Henry Pitney,
Acting General Counsel, Millennium Challenge Corporation.

Summary of Millennium Challenge Compact With the Republic of Moldova

    The five-year Millennium Challenge Compact with the Republic of 
Moldova (``Compact'') will provide up to $262 million to reduce poverty 
and accelerate economic growth. The Compact is intended to improve 
agricultural productivity and to expand access to markets and services 
through investments in critical infrastructure in the irrigation and 
road sectors, and through capacity-building in the high value 
agriculture sector (``Program'').

Transition to High Value Agriculture Project ($101.77 Million)

    The Transition to High Value Agriculture Project (``THVA Project'') 
seeks to (i) increase rural incomes by stimulating growth in high value 
agriculture (``HVA'') and (ii) act as a catalyst for future investment 
in HVA production by establishing a successful model that contributes 
to a conducive institutional and policy environment for irrigated 
agriculture. Agriculture has been the backbone of the Moldovan economy, 
though, following the collapse

[[Page 4850]]

of the Soviet Union, Moldova lost its position as a key exporter of 
fresh produce, and its extensive irrigation systems and post-harvest 
cold chain fell into disrepair. Today, the country's agricultural 
sector suffers from poor water service, production of low-value crops, 
low water-tariff revenue, and underinvestment in maintenance of the 
irrigation system, all of which contribute to high rates of rural 
poverty. However, with its fertile soils, relatively long growing 
season, and proximity to both European Union and former Soviet markets, 
Moldova has many of the necessary conditions to regain competitiveness 
in HVA. The THVA Project supports the government of Moldova's national 
strategy to increase land under irrigation and to upgrade the cold 
chain to facilitate the transition to HVA. The set of four reinforcing 
and integrated activities include:
     Centralized Irrigation System Rehabilitation: 
Rehabilitation of up to 11 large irrigation systems servicing an area 
of approximately 15,500 hectares located along the Prut and Nistru 
rivers that will provide reliable water needed for HVA crops, as well 
as improve food security through enhanced grain production.
     Irrigation Sector Reform: Provision of technical 
assistance and capacity-building to: (i) Support the establishment of 
water user associations able to manage and operate the rehabilitated 
irrigation systems and the legal transfer of responsibilities for 
operations and maintenance of repaired irrigation systems to water user 
associations; (ii) improve water resource management by the government, 
including the establishment of a modem water-rights system; and (iii) 
ensure the legal and institutional framework needed for irrigation 
sector sustainability and further private and donor investment.
     Access to Agricultural Finance: Establishment of financing 
facilities that will support HVA-related investment by farmers and 
rural entrepreneurs.
     Growing HVA Sales: Provision of technical assistance to 
farmers and rural entrepreneurs to better access HVA markets and 
support the shift to HVA at the production and post-harvest level, in 
an activity undertaken jointly with, and administered by, the United 
States Agency for International Development.

Road Rehabilitation Project ($132.84 Million)

    The Road Rehabilitation Project seeks to (i) increase the income of 
the local population through reduced cost of transport and reduced 
costs of goods and services; (ii) reduce losses to the national economy 
resulting from the deteriorated road conditions; and (iii) reduce the 
number of road accidents through improved traffic conditions. 
Specifically, the project will support the rehabilitation of the M2 
road, which is part of an arterial highway connecting Chisinau, the 
Moldovan capital, to the Ukrainian border and beyond to Kyiv, the 
Ukrainian capital. This route serves as a significant link between 
Moldova and Ukraine for private, passenger, and commercial traffic, and 
has been prioritized by the government of Moldova in its National 
Development Strategy and Land Transport Infrastructure Strategy with 
the long-term goal to provide an efficient transport system that 
facilitates opportunities for trade in domestic and international 
markets and the mobility of its citizens. The existing M2 segment is a 
paved two-lane road that is extremely deteriorated. Compact funding 
will support the rehabilitation of 93 kilometers, beginning at the city 
of Sarateni at the southern end, passing near the city of Soroca, and 
ending at the junction with the R7 road west to Drochia at the northern 
end; construction (or reconstruction) or associated structures such as 
bridges and culverts; and improvement in road safety along the 
rehabilitated corridor. In addition, the Compact will fund a 
feasibility study, environmental and social impact assessment, detailed 
design work, and a resettlement action plan for the road segment 
continuing on to the Ukrainian border at the town of Otaci. These 
studies can be used by the government of Moldova to seek funding from 
other donors, or to plan investments with its own resources.

Administration

    The Compact also includes program management and oversight costs 
estimated at $23.85 million over a five-year time frame, including the 
costs of administration, management, auditing, fiscal and procurement 
agent services and environmental and social oversight. In addition, the 
cost of monitoring and evaluation of the Compact is budgeted at 
approximately $3.54 million.

Intended Beneficiaries and Expected Results

    The THVA Project is expected to benefit approximately 32,000 
households (or approximately 124,000 individuals), with an average 
total benefit over 20 years equal to 170 percent of the beneficiaries' 
current annual income. Beneficiaries include owners or shareholders of 
farming enterprises; farmers or owners of land; and laborers employed 
in the operation of enterprise farms within the command areas where MCC 
will rehabilitate the irrigation systems, as well as producers and 
intermediaries investing in and working in the HVA sector. The economic 
analyses indicate an economic rate of return of approximately 12.7 
percent.
    The Road Rehabilitation Project is expected to benefit 
approximately 78,000 households (or approximately 302,000 
beneficiaries) over the next 20 years, with an economic rate of return 
of approximately 19 percent. Beneficiaries include users and owners of 
motorized vehicles utilizing the road including local agricultural and 
other producers and buyers, providers and users of passenger transport 
services, and noncommercial owners of private motorized transport.

Millennium Challenge Compact Between the United States of America 
Acting Through the Millennium Challenge Corporation and the Republic of 
Moldova

Table of Contents

Article 1. Goal and Objectives
    Section 1.1 Compact Goal
    Section 1.2 Program Objective
    Section 1.3 Project Objectives
Article 2. Funding and Resources
    Section 2.1 Program Funding
    Section 2.2 Compact Implementation Funding
    Section 2.3 MCC Funding
    Section 2.4 Disbursement
    Section 2.5 Interest
    Section 2.6 Government Resources; Budget
    Section 2.7 Limitations of the Use of MCC Funding
    Section 2.8 Taxes
Article 3. Implementation
    Section 3.1 Program Implementation Agreement
    Section 3.2 Government Responsibilities
    Section 3.3 Policy Performance
    Section 3.4 Government Assurances
    Section 3.5 Implementation Letters
    Section 3.6 Procurement
    Section 3.7 Records; Accounting; Covered Providers; Access
    Section 3.8 Audits; Reviews
Article 4. Communications
    Section 4.1 Communications
    Section 4.2 Representatives
    Section 4.3 Signatures
Article 5. Termination; Suspension; Refunds
    Section 5.1 Termination; Suspension
    Section 5.2 Refunds; Violation
    Section 5.3 Survival
Article 6. Compact Annexes; Amendments; Governing Law
    Section 6.1 Annexes
    Section 6.2 Amendments
    Section 6.3 Inconsistencies
    Section 6.4 Governing Law
    Section 6.5 Additional Instruments
    Section 6.6 References to MCC Web Site
    Section 6.7 References to Laws, Regulations, Policies and 
Guidelines

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    Section 6.8 MCC Status
    Section 6.9 Counterparts; Electronic Delivery
    Section 6.10 Counterparts; Electronic Delivery
Article 7. Entry Into Force
    Section 7.1 Domestic Requirements
    Section 7.2 Conditions Precedent to Entry into Force
    Section 7.3 Date of Entry into Force
    Section 7.4 Compact Term
    Section 7.5 Provisional Application
Annex I: Program Description
Annex II: Multi-Year Financial Plan Summary
Annex III: Description of the Monitoring and Evaluation Plan
Annex IV: Conditions to Disbursement of Compact Implementation 
Funding
Annex V: Definitions
Annex VI: Specific Tax Exemption Mechanisms
    Schedule A--Value Added Tax (VAT)
    Schedule B--Customs Duties
    Schedule C--Corporate Income Tax
    Schedule D--Individual Income Tax
    Schedule E--Taxation of Petroleum Products
    Schedule F--Temporary Admission of Equipment, Vehicles, and 
Household Goods
    Schedule G--Excise Duty
    Schedule H--Customs Procedure Tax
    Schedule I--Other Taxes

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 
Republic of Moldova (``Moldova''), acting through its government (the 
``Government'').
    MCC and the Government are individually referred to in this Compact 
as a ``Party'' and together, as the ``Parties.'' Capitalized terms used 
in this Compact will have the meanings specified in Annex V hereto.
    Recalling that the Government consulted with the private sector and 
civil society of Moldova to determine the priorities for the use of 
Millennium Challenge Account assistance and developed and submitted to 
MCC a proposal for such assistance to achieve lasting economic growth 
and poverty reduction; and
    Recognizing that MCC wishes to help Moldova implement a program to 
achieve the goal and objectives described herein (the ``Program'').
    The Parties agree as follows:

Article 1. Goal and Objectives

Section 1.1 Compact Goal

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

Section 1.2 Program Objective

    The objective of the Program is to increase incomes through 
increased agricultural productivity and expanded access to markets and 
services through improved roads (as further described in Annex I, the 
``Program Objective'').

Section 1.3 Project Objectives

    The objectives of the Projects (as further described in Annex I) 
(each a ``Project Objective'' and collectively, the ``Project 
Objectives'') are as follows:
    (a) The objectives of the Transition to High Value Agriculture 
Project (as defined in Annex I) are to: (i) Increase rural incomes by 
stimulating growth in irrigated high value agriculture; and (ii) 
catalyze future investments in high value agriculture by establishing a 
successful and sustainable model of irrigation system and water 
resource management and a conducive institutional and policy 
environment for irrigated agriculture.
    (b) The objectives of the Road Rehabilitation Project (as defined 
in Annex I) are to: (i) Increase incomes of the local population by 
reducing the cost of transport, goods and services; (ii) reduce losses 
to the national economy resulting from deteriorated road conditions; 
and (iii) reduce the number of road accidents through improved traffic 
conditions.

Article 2. Funding and Resources

Section 2.1 Program Funding

    Upon entry into force of this Compact, MCC will grant to the 
Government, under the terms of this Compact, an amount not to exceed 
Two Hundred and Fifty-Four Million United States Dollars 
(US$254,000,000) to support the Program (``Program Funding''). The 
allocation of Program Funding is generally described in Annex II to 
this Compact.

Section 2.2 Compact Implementation Funding

    (a) Upon signature of this Compact, MCC hereby grants to the 
Government, under the terms of this Compact, in addition to the Program 
Funding described in Section 2.1, an amount not to exceed Eight Million 
United States Dollars (US$8,000,000) (``Compact Implementation 
Funding'') under Section 609(g) of the Millennium Challenge Act of 
2003, as amended (the ``MCA Act''), for use by the Government as agreed 
by the Parties, which may include use for the following purposes:
    (i) Financial management and procurement activities; and
    (ii) Start-up activities, including staff salaries and 
administrative support expenses, such as office equipment, computers 
and other information technology or capital equipment; and other 
Compact implementation activities approved by MCC.
    The allocation of Compact Implementation Funding is generally 
described in Annex II to this Compact.
    (b) In accordance with Section 7.5 of this Compact, this Section 
2.2 and other provisions of this Compact necessary to make use of 
Compact Implementation Funding for the purposes set forth herein, will 
be effective, for purposes of Compact Implementation Funding only, as 
of the date this Compact is signed by MCC and the Government.
    (c) Each Disbursement of Compact Implementation Funding is subject 
to satisfaction of the conditions to such disbursement as set forth in 
Annex IV.
    (d) If, after the first anniversary of this Compact entering into 
force, MCC determines that the full amount of Compact Implementation 
Funding under Section 2.2(a) of this Compact exceeds the amount which 
reasonably can be utilized for the purposes and uses set forth in 
Section 2.2(a) of this Compact, MCC, by written notice to the 
Government, may withdraw the excess amount, thereby reducing the amount 
of the Compact Implementation Funding as set forth in Section 2.2(a) 
(such excess, the ``Excess CIF Amount''). In such event, the amount of 
Compact Implementation Funding granted to the Government under Section 
2.2(a) will be reduced by the Excess CIF Amount, and MCC will have no 
further obligations with respect to such Excess CIF Amount.
    (e) MCC, at its option by written notice to the Government, may 
elect to grant to the Government an amount equal to all or a portion of 
such Excess CIF Amount as an increase in the Program Funding, and such 
additional Program Funding will be subject to the terms and conditions 
of this Compact and any relevant supplemental agreement applicable to 
Program Funding.

Section 2.3 MCC Funding

    Program Funding and Compact Implementation Funding are collectively 
referred to in this Compact as ``MCC Funding.''

Section 2.4 Disbursement

    In accordance with this Compact and the Program Implementation 
Agreement, MCC will disburse MCC Funding for expenditures incurred in 
furtherance of the Program (each instance, a ``Disbursement''). Subject 
to the satisfaction of all applicable conditions, the proceeds of such

[[Page 4852]]

Disbursements will be made available to the Government, at MCC's sole 
election, by (a) deposit to one or more bank accounts established by 
the Government through MCA-Moldova and acceptable to MCC (each, a 
``Permitted Account'') or (b) direct payment to the relevant provider 
of goods, works or services for the implementation of the Program. MCC 
Funding may be expended only to fund Program expenditures as provided 
in this Compact and the Program Implementation Agreement.

Section 2.5 Interest

    Except as otherwise agreed by MCC, the Government will transfer to 
MCC any interest or other earnings that accrue on MCC Funding (whether 
by directing such payments to a bank account outside Moldova that MCC 
may from time to time indicate or as otherwise directed by MCC).

Section 2.6 Government Resources; Budget

    (a) The Government will provide all funds and other resources, and 
will take all actions, that are necessary to carry out the Government's 
responsibilities and obligations under this Compact.
    (b) The Government will provide suitable and adequate office space 
for MCA-Moldova and the MCC resident country mission.
    (c) The Government will 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.
    (d) The Government will not reduce the normal and expected 
resources that it would otherwise receive or budget from sources other 
than MCC for the activities contemplated under this Compact and the 
Program.
    (e) Unless the Government discloses otherwise to MCC in writing, 
MCC Funding will be in addition to the resources that the Government 
would otherwise receive or budget for the activities contemplated under 
this Compact and the Program.

Section 2.7 Limitations on the Use of MCC Funding

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

Section 2.8 Taxes

    (a) Unless the Parties otherwise specifically agree in writing, and 
subject to the provisions of Sections 2.8(b) and 2.8(c), the Government 
will ensure that each of the following is free from the payment or 
imposition of any existing or future taxes, duties, levies, 
contributions, or other similar charges (``Taxes'') of or in Moldova 
(including any such Taxes imposed by a national, regional, local, or 
other governmental or taxing authority of or in Moldova) (i) The 
Program; (ii) MCC Funding; (iii) interest or earnings on MCC Funding; 
(iv) any Project or activity implemented under or in connection with 
the Program; (v) MCA-Moldova; (vi) goods and other property, works, 
services, technology, and other assets and activities, whether 
acquired, used or performed at any level or stage, under or in 
connection with the Program or any Project; (vii) persons and entities 
that provide such goods and other property, works, services, 
technology, and assets, or perform such activities; and (viii) income, 
profits, and payments with respect thereto. The Parties acknowledge and 
agree that ``Taxes'' include, among other things, value added and other 
transfer taxes (including exemption therefrom with credit), profit and 
income taxes, property and ad valorem taxes, import and export duties 
and taxes (including for goods imported and re-exported for personal 
use), withholding taxes, payroll taxes, social security and mandatory 
medical insurance contributions, road taxes and various applicable 
local taxes (such as, but not limited to, taxes on real estate 
property, taxes on territorial improvement, and taxes on placement of 
advertisements in public places).
    (b) Without limiting the generality of the definition of Taxes as 
set forth in Section 2.8(a), the Parties hereby agree that the 
following taxes, duties, levies, contributions, and similar charges are 
specifically included in the definition of ``Taxes'' requiring 
exemptions in accordance with this Compact: (i) Customs duties and 
associated fees; (ii) value added taxes (``VAT''); (iii) registration 
and stamp taxes; (iv) taxes on the corporate incomes of professional, 
accounting or consulting firms derived from Compact-related work; (v) 
taxes on the corporate income of companies or other legal persons 
derived from Compact-related work; (vi) taxes on the personal income of 
individuals working under the Compact; (vii) taxes on temporary 
admissions of Compact-related goods and personal household goods; 
(viii) excise duties; (ix) customs procedure taxes; (x) road taxes; and 
(xi) real estate taxes and other local taxes. With respect to VAT and 
excise taxes on petroleum products, these will be addressed by way of a 
reimbursement, as set forth in Schedule E of Annex VI.
    (c) Unless otherwise agreed by MCC in writing, set forth in Annex 
VI are procedures that the Government will implement to effectuate the 
exemption from Taxes required by Section 2.8(a) and Section 2.8(b) 
above with respect to each of the Taxes addressed therein. To the 
extent that there are Taxes not addressed in Annex VI, whether 
currently in force or established in the future, that MCC determines, 
in its sole discretion, are not being exempted by the Government in 
accordance with this Section 2.8, the Government hereby agrees that it 
will implement appropriate procedures (approved in writing by MCC) to 
ensure that such additional Taxes are exempted in accordance with this 
Section 2.8. For the avoidance of doubt, the identification (or lack of 
identification) of Taxes in Annex VI, or the description (or lack of 
description) of procedures to implement the required exemption from 
such Taxes in Annex VI, will in no way limit the scope of the tax 
exemption required by Section 2.8.

[[Page 4853]]

    (d) Unless otherwise agreed in writing by the Parties, the 
exemption from Taxes set forth in Section 2.8(a) and 2.8(b) will not 
apply to income Taxes on, and contributions to, social insurance 
contributions and mandatory insurance charges for medical assistance, 
with respect to legal persons or natural persons who are nationals of 
Moldova, provided that such Taxes and contributions are not 
discriminatory and are generally applicable to all nationals in 
Moldova.
    (e) In complying with the tax exemption obligations set forth 
herein, the Government will exempt MCA-Moldova, the Fiscal Agent, the 
Procurement Agent, and/or any other provider of goods, services, or 
works in connection with the Program from any obligation imposed by the 
laws of Moldova to withhold any Taxes from any payments made to any 
natural persons or legal persons working under the Program to the 
extent that such legal persons or natural persons are not nationals of 
Moldova.
    (f) For the purposes of Section 2.8(d), Section 2.8(e) and Annex 
VI, the term ``national'' means natural persons who are citizens of 
Moldova or natural persons who hold a Moldovan permanent residence 
certificate and legal persons formed under the laws of Moldova 
(excluding (i) MCA-Moldova, and (ii) any foreign legal person, 
including any Moldovan-registered subsidiary, branch, representative 
office or other permanent establishment of a foreign legal person, with 
respect to income earned for providing services, goods or works in 
connection with this Compact); provided that in determining if a legal 
person has been formed under the laws of Moldova, the taxable status of 
such legal person will be based on its status at the time it is awarded 
or signs a Compact-related agreement or contract, and such initial 
determination will not change regardless of: (1) The type of agreement 
or contract used to employ or engage such company or other legal 
person; (2) any laws of Moldova that purport to change such status 
based on period of contract performance or period of time residing and/
or working in Moldova; and/or (3) any requirement under the laws of 
Moldova that a company or other legal person must establish a branch 
office in Moldova, or otherwise register or organize itself under the 
laws of Moldova, in order to provide goods, services, or works in 
Moldova.
    (g) The Government will from time to time sign and deliver, or 
cause to be signed and delivered, such other instructions, instruments 
or documents, and to take or cause to be taken such other actions as 
may be necessary or appropriate in the determination of MCC in order to 
implement this Section 2.8.
    (h) If a Tax has been levied and paid contrary to the requirements 
of this Section 2.8, or any supplemental agreement entered into 
pursuant to this Section 2.8, the Government will refund promptly to 
MCC (or to another party as designated by MCC) the amount of such Tax 
in United States Dollars or the currency of Moldova within thirty (30) 
days (or such other period as may be agreed in writing by the Parties) 
after the Government is notified in writing (whether by MCC or MCA-
Moldova) that such Tax has been paid.
    (i) No MCC Funding, proceeds thereof, or Program Assets may be 
applied by the Government in satisfaction of its obligations under this 
Section 2.8.
    (j) The mechanism for application of the tax exemption described in 
this Section 2.8 and Annex VI will be provided in a Government decision 
to be enacted after ratification of this Compact.
    (k) Notwithstanding the provisions of this Section 2.8 and Annex 
VI, with respect to all funding associated with the Activities which 
USAID intends to administer, the treatment of Taxes, other fees and any 
other fiscal obligations to the Government will be in compliance with 
the terms and conditions as stipulated and agreed to in the ``Agreement 
between the Government of the United States of America and the 
Government of Moldova Regarding Cooperation to Facilitate the Provision 
of Assistance,'' which entered into force on March 21, 1994, as may be 
amended from time to time.

Article 3. Implementation

Section 3.1 Program Implementation Agreement

    Prior to entry into force of this Compact, the Government and MCC 
will enter into an agreement relating to, among other matters, 
implementation arrangements, fiscal accountability and disbursement, 
and use of MCC Funding (the ``Program Implementation Agreement'' or 
``PIA''). The Government will implement the Program in accordance with 
the Compact and the PIA.

Section 3.2 Government Responsibilities

    (a) The Government has principal responsibility for overseeing and 
managing the implementation of the Program.
    (b) The Government hereby designates MCA-Moldova, an entity to be 
established through passage of a decree (the ``Establishment Decree''), 
as the accountable entity to implement the Program and to exercise and 
perform the Government's rights and responsibilities with respect to 
the oversight, management, and implementation of the Program, 
including, without limitation, managing the implementation of Projects 
and their Activities, allocating resources, and managing procurements. 
Such entity will be referred to herein as ``MCA-Moldova,'' and will 
have the authority to bind the Government with regard to all Program 
Activities. The Establishment Decree will be in form and substance 
satisfactory to MCC. For the avoidance of doubt, the designation of 
MCA-Moldova as set forth in this Section 3.2(b) will not relieve the 
Government of any of its obligations or responsibilities as set forth 
hereunder, under any related agreement (including, upon execution 
thereof, the PIA), or under the Program Guidelines, for which the 
Government remains fully responsible. MCC hereby acknowledges and 
consents to the designation in this Section 3.2(b).
    (c) The Government will ensure that no law or regulation in Moldova 
now or hereinafter in effect makes or will make unlawful or otherwise 
prevent or hinder the performance of any of the Government's 
obligations under this Compact, the PIA, or any other related agreement 
or any transaction contemplated hereby or thereby.
    (d) The Government will ensure that any assets or services funded 
in whole or in part (directly or indirectly) by MCC Funding are used 
solely in furtherance of this Compact and the Program unless otherwise 
agreed by MCC in writing.
    (e) The Government will take all necessary or appropriate steps to 
achieve the Program Objective and the Project Objectives during the 
Compact Term.
    (f) The Government will fully comply with the Program Guidelines, 
as applicable, in its implementation of the Program.

Section 3.3 Policy Performance

    In addition to undertaking the specific policy, legal, and 
regulatory reform commitments identified in Annex I (if any), the 
Government will seek to maintain and to improve its level of 
performance under the policy criteria identified in Section 607 of the 
MCA Act, and the selection criteria and methodology used by MCC.

Section 3.4 Government Assurances

    The Government assures MCC that, as of the date this Compact is 
signed by the

[[Page 4854]]

Government, the information provided to MCC by or on behalf of the 
Government in the course of reaching agreement with MCC on this Compact 
is true, correct and complete in all material respects.

Section 3.5 Implementation Letters

    From time to time, MCC may provide guidance to the Government in 
writing on any matters relating to this Compact, MCC Funding, or 
implementation of the Program (each, an ``Implementation Letter''). The 
Government will apply such guidance in implementing the Program. 
Without limiting the foregoing, either Party may, through its Principal 
Representative or any Additional Representative, as the case may be, 
initiate discussions that may result in a jointly agreed-upon 
Implementation Letter to confirm and record their mutual understanding 
on aspects related to the implementation of this Compact, the PIA, or 
other related agreements.

Section 3.6 Procurement

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

Section 3.7 Records; Accounting; Covered Providers; Access

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

Section 3.8 Audits; Reviews

    (a) Government Audits. Except as the Parties may otherwise agree in 
writing, the Government will, on at least a semi-annual basis, conduct, 
or cause to be conducted, financial audits of all disbursements of MCC 
Funding covering the period from signing of this Compact until the 
earlier of the following December 31 or June 30 and covering each six-
month period thereafter ending December 31 and June 30, through the end 
of the Compact Term. In addition, upon MCC's request, the Government 
will ensure that such audits are conducted by an independent auditor 
approved by MCC and named on the list of local auditors approved by the 
Inspector General of MCC (the ``Inspector General'') or a United 
States-based certified public accounting firm selected in accordance 
with the ``Guidelines for Financial Audits Contracted by MCA'' (the 
``Audit Guidelines'') issued and revised from time to time by the 
Inspector General, which are posted on the MCC Web site. Audits will be 
performed in accordance with the Audit Guidelines and be subject to 
quality assurance oversight by the Inspector General. Each audit must 
be completed and the audit report delivered to MCC no later than ninety 
(90) days after the first period to be audited and no later than ninety 
(90) days after each June 30 and December 31 thereafter, or such other 
period as the Parties may otherwise agree in writing.
    (b) Audits of United States Entities. The Government will ensure 
that agreements between the Government or any Provider, on the one 
hand, and a United States nonprofit organization, on the other hand, 
that are financed with MCC Funding state that the United States 
nonprofit organization is subject to the applicable audit requirements 
contained in OMB Circular A-133 issued by the United States Government 
Office of Management and Budget (``OMB''). The Government will ensure 
that agreements between the Government or any Provider, on the one 
hand, and a United States for-profit Covered Provider, on the other 
hand, that are financed with MCC Funding state that the United States 
for-profit

[[Page 4855]]

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

Article 4. Communications

Section 4.1 Communications

    Any document or communication required or submitted by either Party 
to the other under this Compact must be in writing and, except as 
otherwise agreed with MCC, in English. For this purpose, the address of 
each Party is set forth below.
To MCC
    Millennium Challenge Corporation, Attention: Vice President, 
Compact Implementation, (in each case, 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, Compact Implementation), [email protected] (Vice 
President and General Counsel)
To the Government
    State Chancellery, Attention: Minister of State, 1, Piata Marii 
Adunari Nationale, Chisinau MD-2033, Republic of Moldova, Facsimile: 
(373) 22 242 696, Telephone: (373) 22 250 104, E-mail: 
[email protected].
With a Copy to MCA-Moldova
    Upon establishment of MCA-Moldova, MCA-Moldova will notify the 
Parties of its contact details.

Section 4.2 Representatives

    For all purposes of this Compact, the Government will be 
represented by the individual holding the position of, or acting as, 
the State Minister of Moldova, and MCC will be represented by the 
individual holding the position of, or acting as, Vice President, 
Compact Implementation (each of the foregoing, a ``Principal 
Representative''). Each Party, by written notice to the other Party, 
may designate one or more additional representatives (each, an 
``Additional Representative'') for all purposes other than signing 
amendments to this Compact. The Government hereby irrevocably 
designates the Executive Director of MCA-Moldova as an Additional 
Representative. A Party may change its Principal Representative to a 
new representative that holds a position of equal or higher rank upon 
written notice to the other Party.

Section 4.3 Signatures

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

Article 5. Termination; Suspension; Refunds

Section 5.1 Termination; Suspension

    (a) Either Party may terminate this Compact without cause in whole 
by giving the other Party thirty (30) days written notice. MCC may also 
terminate this Compact without cause in part by giving the Government 
thirty (30) days written notice.
    (b) MCC may, immediately, upon written notice to the Government, 
suspend or terminate this Compact or MCC Funding, in whole or in part, 
and any obligation related thereto, if MCC determines that any 
circumstance identified by MCC as a basis for suspension or termination 
(whether in writing to the Government or by posting on the MCC Web 
site) has occurred, which circumstances include, but are not limited, 
to the following:
    (i) The Government fails to comply with its obligations under this 
Compact, the PIA, or any other agreement or arrangement entered into by 
the Government in connection with this Compact or the Program;
    (ii) An event or series of events has occurred that MCC determines 
makes it probable that the Program Objective or any of the Project 
Objectives will not be achieved during the Compact Term or that the 
Government will not be able to perform its obligations under this 
Compact;
    (iii) A use of MCC Funding or continued implementation of this 
Compact or the Program violates 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 Moldova ineligible to receive United States 
economic assistance under Part I of the Foreign Assistance Act of 1961, 
as amended (22 U.S.C. 2151 et seq.), by reason of the application of 
any provision of the Foreign Assistance Act of 1961 or any other 
provision of law;
    (vi) Moldova is classified as a Tier 3 country in the United States 
Department of State's annual Trafficking in Persons Report;
    (vii) The Government has engaged in a pattern of actions 
inconsistent with the criteria used to determine the eligibility of 
Moldova for assistance under the MCA Act; or
    (viii) The Government or another person or entity receiving MCC 
Funding or using assets acquired in whole or in part with MCC Funding 
is found to have been convicted of a narcotics offense or to have been 
engaged in drug trafficking.
    (c) All Disbursements will cease upon expiration, suspension, or 
termination of this Compact; provided, however, MCC may permit MCC 
Funding to be used, in compliance with this Compact and the PIA, to pay 
for (i) expenditures for goods, works, or services that are properly 
incurred under or in furtherance of the Program before expiration, 
suspension, or termination of this Compact, and (ii) reasonable 
expenditures (including administrative expenses) properly incurred in 
connection with the winding up of the Program within one hundred twenty 
(120) days after the expiration, suspension, or termination of this 
Compact, so long as, with respect to (i) and (ii) herein, the request 
for such expenditures is submitted within ninety (90) days after such 
expiration, suspension, or termination.
    (d) Subject to Section 5.1(c), upon the expiration, suspension, or 
termination of this Compact, (i) any amounts of MCC Funding not 
disbursed by MCC in accordance with the Compact and the PIA will be 
automatically released from any obligation in connection with this 
Compact, and (ii) any amounts of MCC Funding disbursed to the Permitted 
Account by MCC but not expended before the expiration, suspension or 
termination of this Compact, plus accrued interest thereon will be 
returned to MCC within thirty (30) days after the Government receives 
MCC's

[[Page 4856]]

request for such return; provided, however, that if this Compact is 
suspended or terminated in part, MCC may request a refund for only the 
amount of MCC Funding allocated to the suspended or terminated portion. 
For the avoidance of doubt, interest will accrue from the date of the 
violation and will be calculated at the 10-year U.S. Treasury Note rate 
prevailing as of the close of business in Washington, DC as of the date 
of MCC's request for payment.
    (e) MCC may reinstate any suspended or terminated MCC Funding under 
this Compact if MCC determines that the Government or other relevant 
person or entity has committed to correct each condition for which MCC 
Funding was suspended or terminated.

Section 5.2 Refunds; Violation

    (a) If any MCC Funding, any interest or earnings thereon, or any 
asset acquired in whole or in part with MCC Funding is used for any 
purpose in violation of the terms of this Compact or the PIA, 
including, but not limited to, any violation of the Program Guidelines, 
then MCC may require the Government to repay to MCC in United States 
Dollars the value of the misused MCC Funding, interest, earnings, or 
assets, plus interest within thirty (30) days after the Government's 
receipt of MCC's request for repayment. For the avoidance of doubt, 
interest will accrue from the date of the violation and will be 
calculated at the 10-year U.S. Treasury Note rate prevailing as of the 
close of business in Washington, DC as of the date of MCC's request for 
payment. The Government will not use MCC Funding, proceeds thereof or 
Program Assets to make such payment.
    (b) Notwithstanding any other provision in this Compact or any 
other agreement to the contrary, MCC's right under this Section 5.2 for 
a refund will continue during the Compact Term and for a period of (i) 
five (5) years thereafter, or (ii) one (1) year after MCC receives 
actual knowledge of such violation, whichever is later.

Section 5.3 Survival

    The Government's responsibilities under Sections 2.4, 2.5, 2.6, 
2.7, 2.8, 3.7, 3.8, 5.1(c), 5.1(d), 5.2, 5.3, 6.2, and 6.4 of this 
Compact will survive the expiration, suspension or termination of this 
Compact.

Article 6. Compact Annexes; Amendments; Governing Law

Section 6.1 Annexes

    Each annex to this Compact constitutes an integral part hereof, and 
references to ``Annex'' mean an annex to this Compact unless otherwise 
expressly stated.

Section 6.2 Amendments

    (a) The Parties may amend this Compact only by a written agreement 
signed by the Principal Representatives.
    (b) Without formally amending this Compact, the Government hereby 
acknowledges and agrees that the Parties may, through the Principal 
Representative, in the case of Moldova, or Principal Representative, or 
any Additional Representative, in the case of MCC, as the case may be, 
in writing, agree to modify any Annex to this Compact to (i) suspend, 
terminate, or modify any project described in Annex I (each, a 
``Project'' and collectively, the ``Projects'') or to create a new 
project, (ii) change the 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 the 
signature of this Compact and a new project, (iii) modify the terms of 
Section B.3 of Annex I, or (iv) add, delete, or waive any condition 
precedent described in Annex IV, provided that any such modification 
(1) is consistent in all material respects with the Program Objective, 
(2) does not cause the amount of Program Funding to exceed the 
aggregate amount specified in Section 2.1 of this Compact (as may be 
modified by operation of Section 2.2(e) of this Compact), (3) does not 
cause the amount of Compact Implementation Funding to exceed the 
aggregate amount specified in Section 2.2(a) of this Compact, (4) does 
not cause the Government's responsibilities or contribution of 
resources to be less than specified in this Compact, (5) does not 
extend the Compact Term, and (6) in the case of a modification to 
change allocations of funds among Projects or the creation of a new 
Project, does not materially adversely affect any Activity under 
Program administration or monitoring and evaluation.
    (c) Any modification of any Annex to this Compact signed in 
accordance with Section 6.2(b), or any modification of any other 
provision of this Compact pursuant to Section 6.2(a), will be binding 
on the Government without the need for further action by the 
Government, any further Parliamentary action, or satisfaction of any 
additional domestic requirements of Moldova.

Section 6.3 Inconsistencies

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

Section 6.4 Governing Law

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

Section 6.5 Additional Instruments

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

Section 6.6 References to MCC Web Site

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

Section 6.7 References to Laws, Regulations, Policies, and Guidelines

    Each reference in this Compact, the PIA, or any other agreement 
entered into in connection with this Compact, to a law, regulation, 
policy, guideline, or similar document (including, but not limited to, 
the Program Guidelines) will be construed as a reference to such law, 
regulation, policy, guideline, or similar document as it may, from time 
to time, be amended, revised, replaced, or extended and will include 
any law, regulation, policy, guideline, or similar document issued 
under or otherwise applicable or related to such law, regulation, 
policy, guideline, or similar document.

Section 6.8 MCC Status

    MCC is a United States government corporation acting on behalf of 
the United States government in the implementation of this Compact. MCC 
and the United States government have no liability under this Compact, 
the Program Implementation Agreement, or any related agreement, are 
immune from any action or proceeding arising under or relating to any 
of the foregoing documents, and the Government hereby waives and 
releases all claims related to any such liability. In matters arising 
under or relating to this Compact, the

[[Page 4857]]

Program Implementation Agreement, or any related agreement, neither MCC 
nor the United States government will be subject to the jurisdiction of 
the courts of Moldova or of any other jurisdiction or of any other 
body.

Section 6.9 Counterparts; Electronic Delivery

    (a) Counterparts. Signatures to this Compact, the Program 
Implementation Agreement, and any amendments to such agreements that 
are done as instruments to be signed by both Parties will be signed on 
the same page. Any other documents arising out of this Compact, may be 
signed in one or more counterparts. Such counterparts when delivered 
and taken together will constitute a single document.
    (b) Electronic Delivery. A signature to this Compact, the Program 
Implementation Agreement, and any amendments to such agreements, will 
be an original signature. With respect to any other documents arising 
out of this Compact, a signature delivered by facsimile or electronic 
mail in accordance with Section 4.1 of this Compact will be deemed an 
original signature and will be binding on the Party delivering such 
signature, and the Parties hereby waive any objection to such signature 
or to the validity of the underlying document, certificate, notice, 
instrument, or agreement on the basis of the signature's legal effect, 
validity or enforceability solely because it is in facsimile or 
electronic form.

Article 7. Entry Into Force

Section 7.1 Domestic Requirements

    Before this Compact enters into force, the Government will proceed 
in a timely manner to obtain ratification of this Compact by the 
Moldovan Parliament. The Parties understand that, upon its entry into 
force this Compact will prevail over the domestic laws of Moldova.

Section 7.2 Conditions Precedent to Entry Into Force

    Before this Compact enters into force:
    (a) The PIA must have been signed by the parties thereto;
    (b) The Government must have delivered to MCC:
    (i) A legal opinion from the Minister of Justice of Moldova (or 
such other legal representative of the Government acceptable to MCC), 
in form and substance satisfactory to MCC; and
    (ii) Complete, certified copies of all decrees, legislation, 
regulations, or other governmental documents relating to the 
Government's domestic requirements for this Compact to enter into force 
and the satisfaction of Section 7.1, which MCC may post on the MCC Web 
site or otherwise make publicly available; and
    (c) MCC must determine that, after signature of this Compact, the 
Government has not engaged in any action or omission that is 
inconsistent with the eligibility criteria for MCC Funding.

Section 7.3 Date of Entry into Force

    This Compact will enter into force on the 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 that the conditions precedent to 
entry into force of Section 7.2 have been met.

Section 7.4 Compact Term

    This Compact will remain in force for five (5) years after its 
entry into force, unless terminated earlier under Section 5.1 (the 
``Compact Term'').

Section 7.5 Provisional Application

    Upon signature of this Compact and until this Compact has entered 
into force in accordance with Section 7.3, the Parties will 
provisionally apply the terms of this Compact and the PIA; provided 
that, no Program Funding will be made available or disbursed before 
this Compact enters into force.
    In Witness Whereof, the undersigned, duly authorized by their 
respective governments, have signed this Compact.
    Done at Washington, DC, this 22nd day of January, 2010, in the 
English language only.
    For Millennium Challenge Corporation, on behalf of the United 
States of America, Name: Daniel W. Yohannes, Title: Chief Executive 
Officer.
    For the Republic of Moldova, Name: Iurie Leanc[abreve], Title: 
Deputy Prime Minister, Minister of Foreign Affairs and European 
Integration.

Annex I--Program Description

    This Annex I describes the Program that MCC Funding will support in 
Moldova during the Compact Term.

A. Program Overview

1. Background and Consultative Process
    With a population of approximately 3.8 million inhabitants, Moldova 
was originally declared eligible for MCC Compact assistance in 2006. 
The Government mobilized a team of consultants to conduct an empirical 
analysis of the key constraints to growth. This constraints analysis 
served as the basis for two rounds of national consultations through 
regional town-hall meetings, as well as numerous meetings with smaller 
groups of stakeholders. Following these consultations, the Government 
submitted a Compact proposal in February 2008. In addition to the 
national consultations, project-specific consultations were conducted 
as part of the environmental and social impact assessment, both by the 
Government and by MCC-contracted entities. These public fora involved 
consultations with key stakeholders including: local government 
officials, regional and national staff from government agencies, civil 
society representatives, environmental and social non-governmental 
organizations, and interested local people to evaluate the proposed 
projects, to raise concerns, and to make recommendations on the design 
requirements to enhance benefits and reduce negative impacts from 
project implementation. These recommendations are to be incorporated 
into the detailed design to better address community needs. In 
addition, the Government and MCC worked with a consultative group of 
public and private sector representatives in the agricultural sector.
    Agriculture has been the backbone of the Moldovan economy, with 
Moldova formerly serving as an important exporter of high value 
agriculture to the rest of the Soviet Union. Following the collapse of 
the Soviet Union, Moldova lost its position as a key exporter of fresh 
produce, and its extensive irrigation systems and post-harvest cold 
chain fell into disrepair.
    Reforms necessary to attract private and donor investment in 
agriculture have been slow. As a result, Moldovan agriculture suffers 
from low productivity, contributing to high rates of rural poverty. 
However, with its fertile soils, relatively long growing season, and 
proximity to both European Union and former Soviet markets, Moldova has 
many of the necessary conditions to regain competitiveness in high 
value agriculture. The key constraints facing Moldovan producers are: 
lack of reliable water, lack of financing, lack of access to markets 
and technologies and lack of know-how. The Transition to High Value 
Agriculture Project will address these constraints.
    The quality of the road network in Moldova is seriously 
deteriorated and has been cited repeatedly as a binding constraint to 
economic growth which impacts the entire country, as the country's 
economy is highly dependent on road transport. The Road Rehabilitation 
Project will address this constraint.

[[Page 4858]]

2. Program Objective
    The Program Objective is to increase incomes through increased 
agricultural productivity and expanded access to markets and services 
through improved roads. The Program consists of the Transition to High 
Value Agriculture Project and the Road Rehabilitation Project as 
further described in this Annex I.
3. Environmental and Social Safeguards
    The Transition to High Value Agriculture Project and the Road 
Rehabilitation Project will be implemented in compliance with the MCC 
Environmental Guidelines and MCC's environmental and social guidelines 
posted from time to time on the MCC Web site or otherwise made 
available to the Government by MCC (``MCC Gender Policy'') and any 
resettlement will be carried out in accordance with best international 
resettlement standards based on the World Bank's Operational Policy on 
Involuntary Resettlement in effect as of July 2007 (``OP 4.12'') and in 
accordance with procedures approved by MCC. The Government will also 
ensure that the Projects comply with all national environmental laws 
and regulations, licenses and permits, except to the extent such 
compliance would be inconsistent with this Compact. The Government 
will: (a) Cooperate with any ongoing environmental review, or if 
necessary undertake and complete any additional environmental reviews, 
required by MCC or under the laws of Moldova; (b) implement to MCC's 
satisfaction environmental and social mitigation measures identified in 
such environmental review; and (c) commit to fund environmental 
mitigation, (including costs of resettlement) in excess of MCC Funding 
not specifically provided for in the budget for any Project.
    To maximize the positive social impacts of the Projects, address 
cross-cutting social and gender issues such as human trafficking, child 
and forced labor, and HIV/AIDS, and ensure compliance with the MCC 
Gender Policy, MCA-Moldova will: (i) Develop a comprehensive social and 
gender integration plan which, at a minimum, identifies approaches for 
regular, meaningful and inclusive consultations with women and other 
vulnerable/underrepresented groups, consolidates the findings and 
recommendations of Project-specific social and gender analyses and sets 
forth strategies for incorporating findings of the social and gender 
analyses into final Project designs as appropriate; and (ii) ensure, 
through monitoring and coordination during implementation, that final 
Project Activity designs, construction tender documents and 
implementation plans are consistent with and incorporate the outcomes 
of the social and gender analysis and social and gender integration 
plan.

B. Description of the Projects

    Set forth below is a description of each of the Projects that the 
Government will implement, or cause to be implemented, using MCC 
Funding to advance the applicable Project Objective. In addition, 
specific activities that will be undertaken within each Project (each, 
an ``Activity''), including sub-activities, are described.
1. Transition to High Value Agriculture Project
    (a) Summary of Project and Activities.
    The objectives of the Transition to High Value Agriculture Project 
are to: (i) Increase rural incomes by stimulating growth in irrigated 
high value agriculture; and (ii) catalyze future investments in high 
value agriculture by establishing a successful and sustainable model of 
irrigation system and water resource management and a conducive 
institutional and policy environment for irrigated agriculture.
    The Transition to High Value Agriculture Project consists of four 
reinforcing and integrated activities that, when implemented together, 
address the key constraints facing Moldovan producers: lack of reliable 
water, lack of financing, lack of access to markets and technologies, 
and lack of know-how (the ``Transition to High Value Agriculture 
Project''). The Transition to High Value Agriculture Project will 
increase the ability and willingness of farmers to make the transition 
to higher value fruit and vegetable production. By addressing 
infrastructure and institutional/market constraints, the Transition to 
High Value Agriculture Project will break the vicious cycle of poor 
water service, low water tariff revenue, underinvestment in irrigation 
system maintenance, and low investment by farmers in high value 
agriculture (resulting in low agricultural incomes). The Transition to 
High Value Agriculture Project provides the first opportunity to pilot 
a set of institutional and management reforms, together with much 
needed infrastructure rehabilitation that will set the stage for future 
investment and enable Moldova to benefit from its natural comparative 
advantage in agriculture.
    The Transition to High Value Agriculture Project will: (i) 
Rehabilitate up to 11 irrigation systems covering a command area of up 
to approximately 15,500 hectares (the ``Centralized Irrigation System 
Rehabilitation Activity''); (ii) provide technical assistance and 
capacity building to (1) support legal transfer of management and 
operations of MCC-rehabilitated systems from the Government to Water 
User Associations (``WUAs''), (2) improve water resource management, 
including establishment of a modern water rights system, and (3) ensure 
the legal and institutional framework needed for private and/or donor 
investment in the irrigation sector (the ``Irrigation Sector Reform 
Activity''); (iii) provide term financing and technical assistance to 
support high value agriculture-related investments by farmers and rural 
entrepreneurs (the ``Access to Agricultural Finance Activity''); and 
(iv) provide market development support and technical assistance and 
training to help producers and agribusinesses better access high value 
agriculture markets and support the shift to high value agriculture at 
the production and post-harvest level, and promote sustainable 
agricultural practices (the ``Growing High Value Agriculture Sales 
Activity''), the latter to be undertaken jointly with, and administered 
by, the United States Agency for International Development (``USAID'').
    The Transition to High Value Agriculture Project consists of the 
following Activities:
    (i) Centralized Irrigation System Rehabilitation Activity.
    Most of the Government-owned irrigation infrastructure in Moldova 
requires rehabilitation to bring the systems back into working 
condition. MCC Funding will be used to rehabilitate up to 11 systems to 
provide reliable water to farm operations in their command areas. The 
11 systems eligible for rehabilitation have completed feasibility 
studies and are listed below, along with their respective system 
numbers as listed in the Government proposal to MCC, as follows:

1. Chircani-Zirnesti (6-6).
2. Blindesti (3-2).
3. Grozesti (3-6).
4. Leova Sud (5-4).
5. Cahul (6-9).
6. Jora de Jos (11-6).
7. Lopatna (11-7).
8. Cosnita (12-3).
9. Criuleni (14-2).
10. Puhaceni (14-11).
11. Roscani (14-13).

    Specifically, in the above systems that are rehabilitated, MCC 
Funding will support:
    (1) Construction activities: These costs may include, without 
limitation, simple

[[Page 4859]]

repair and/or replacement of pumps, valves, piping and ancillary 
systems, water intakes, related electrical and control systems, and 
pump station buildings; rehabilitation of reservoirs; and, installation 
of new system components where needed.
    (2) Non-construction activities: These costs may include, without 
limitation, studies, construction supervision, WUA equipment reserve, 
environmental and social mitigation (including temporary or permanent 
resettlement compensation associated with construction) and other 
project management costs and technical assistance to be incurred in 
connection with the Centralized Irrigation System Rehabilitation 
Activity.
    (ii) Irrigation Sector Reform Activity.
    The Irrigation Sector Reform Activity is designed to: (1) Establish 
the enabling environment and institutional capacity required to ensure 
effective management (operations, maintenance and financing) of the 
rehabilitated irrigation systems (thereby better ensuring their 
sustainability); and (2) improve Moldova's capacity to manage its 
limited water resources in light of increasing demand for water and the 
expected effects of climate change.
    MCC and the Government agree that institutional and policy reforms 
surrounding the centralized irrigation sector are necessary to maximize 
sustainability and project impact. The Irrigation Sector Reform 
Activity will transfer management responsibility for irrigation systems 
rehabilitated using MCC Funding from the Government to users by 
establishing and building capacity within WUAs. As a necessary 
condition for success in transfer of management and operations and 
maintenance responsibilities to WUAs, a new WUA law acceptable to MCC 
(``WUA Law'') is required in Moldova to provide a solid legal 
foundation both for the transfer process and for the WUAs themselves to 
manage the systems. The Government will also ensure passage of a new 
water law acceptable to MCC (``Water Law'') that will provide more 
secure long-term water rights and the framework to issue water 
management authorizations and improved and upgraded systems for water 
resource management at the basin level.
    The Irrigation Sector Reform Activity consists of two sub-
Activities: (1) The creation and implementation of improved 
institutional arrangements for the operations and maintenance of 
rehabilitated irrigation infrastructure (the ``Irrigation Management 
Transfer Sub-Activity''); and (2) a comprehensive approach to water 
management to build the Government's capacity to ensure that water 
resources are effectively managed over the long term (the ``River Basin 
Management Sub-Activity'').
    (1) Irrigation Management Transfer Sub-Activity.
    The main objectives of the Irrigation Management Transfer Sub-
Activity are: (A) Establishment of fully-functional WUAs with the 
capacity to effectively manage and maintain the rehabilitated systems; 
and (B) legal transfer of management responsibilities from the 
Government to those WUAs through management transfer agreements 
(``MTAs'').
    MCC Funding will support technical assistance and training to: (A) 
Assist WUA formation in a manner consistent with the WUA Law and with 
best practices of financially and operationally sustainable water 
service entities; (B) build capacity within WUAs to exercise 
responsibility for operations and maintenance of the rehabilitated 
systems; (C) support creation of a legal environment that enables WUAs 
to exercise this responsibility (WUA Law, Water Law with long-term 
water rights, and binding MTAs in full compliance with Moldovan law); 
and (D) assist and support the Government, as the legal owner of the 
irrigation infrastructure, to negotiate and sign system specific MTAs 
that legally transfer irrigation management responsibilities to WUAs 
for all rehabilitated systems.
    (2) River Basin Management Sub-Activity.
    Water resource management is vital to the sustainability of both 
irrigated agriculture and Moldova's long-term non-agricultural 
development. Growing demand for water, and concerns about climate 
change and the increasing frequency of drought and floods require 
improved water resource planning and secure water rights. The purpose 
of this sub-Activity is to help the Government improve management of 
water resources and assess future water availability in order to 
promote sustainable growth in the agricultural sector. In particular, 
the sub-Activity will: (A) Support the implementation of a Water Law 
and development of secondary regulations institutionalizing a modern 
system of secure, long-term water rights and river basin management; 
(B) provide institutional support and equipment (geographical 
information systems, databases, and decision support tools) to the 
Government to improve its ability to monitor water quality and quantity 
and issue water certificates under a Water Law and river basin 
management system; and (C) build institutional capacity in the 
Government to engage stakeholders in the participatory planning and 
management of water resources through a system of basin and sub-basin 
councils and management plans.
    (iii) Access to Agricultural Finance Activity.
    The objective of the Access to Agricultural Finance Activity is to 
provide term financing needed to support increased investment in the 
high value agriculture supply chain to facilitate transition to high 
value agriculture, with particular focus on serving farmers and 
enterprises operating in the irrigation systems targeted for 
rehabilitation. Improved sorting and packing of produce, and the 
ability to extend the production and marketing season, can assist 
Moldovan producers to become more competitive in domestic and export 
markets and to sell their production at a higher price. However, with 
virtually no domestic sources of long-term funding and little ability 
to access international debt markets, Moldovan financial institutions 
largely lack the ability to lend for investments in the high value 
agriculture supply chain for periods longer than three years.
    The Access to Agricultural Finance Activity will be initiated on a 
pilot basis, which will be evaluated through an independent impact 
evaluation. The impact evaluation will likely involve some denial of 
credit under the Activity to otherwise eligible approved borrowers, 
possibly through randomization. The final decision whether to scale up 
or terminate the program will be in accordance to the PIA and will 
ensure that the activity, if scaled up, is likely to have an economic 
rate of return of 12 percent as determined by MCC's model for the 
Access to Agricultural Finance Activity in consultation with MCA-
Moldova, or a rate acceptable to MCC, given the level of 
``additionality'' of investment evidenced by the pilot, as well as 
other known parameters and costs of the activity at the time of this 
review.
    The Access to Agricultural Finance Activity consists of two sub-
Activities: (1) Term financing to support increased investments in the 
high value agriculture value chain (the ``High Value Agriculture Post-
Harvest Credit Facility''); and (2) demand-driven investment 
development services support (the ``Investment Development Services'').
    (1) High Value Agriculture Post-Harvest Credit Facility Sub-
Activity.
    The objective of the High Value Agriculture Post-Harvest Credit 
Facility will provide term loans (three to seven years) through 
participating financial institutions (``PFIs'') to fund post-harvest

[[Page 4860]]

supply chain investments. It will be managed by the Credit Line 
Directorate (the ``CLD''), which is a program management unit within 
the Ministry of Finance established by the World Bank to oversee donor 
funded credit lines. Loans will be provided on a ``back-to-back'' basis 
(loans to PFIs will be made against, and will mirror terms of, PFI 
loans to end-borrowers). PFIs will take all repayment risk, with the 
obligation to repay loans regardless of the performance of the end-
borrowers. PFIs will make their own underwriting decisions, subject to 
eligibility requirements stipulated by MCA-Moldova and MCC in the high 
value agriculture post- harvest policy and procedures manual. The 
primary benefit of the High Value Agriculture Post-Harvest Credit 
Facility is not to subsidize lending by financial institutions or 
investment by end borrowers, but instead to provide longer-term funding 
which is otherwise not available in the Moldovan financial markets. An 
approximate market-based rate will be established and adjusting on new 
and existing credits every six months, according to the process and 
methodology outlined in the high value agriculture post-harvest policy 
and procedures manual. The full list of eligible investments will be 
provided in the high value agriculture post-harvest policy and 
procedures manual. The specific determination of interest rates will be 
done in a manner consistent with a positive premium for the provision 
of term financing, and in a manner which prices loans not significantly 
below market rates. MCC reserves the right to review rates in context 
of changing market conditions, but will not raise the subsidy element 
as a means to increase disbursements without independent analysis 
showing that this would lead to greater additionality of viable 
investment. Borrowers are not restricted to investments in, adjacent 
to, or serving the MCC irrigation command areas.
    (2) Investment Development Services.
    Support for investment development services will be provided on a 
demand-driven cost sharing basis through Moldovan investment 
development service providers to those producers, producer groups and 
rural entrepreneurs interested in developing post harvest investment 
projects and obtaining loans for them via the High Value Agriculture 
Post-Harvest Credit Facility.
    (iv) Growing High Value Agriculture Sales Activity.
    The objective of the Growing High Value Agriculture Sales Activity 
is to increase farmer incomes by increasing sales of higher-value fruit 
and vegetables. Market assessments made during the project development 
process (and supported by the analysis of other donors) concluded that 
Moldova might have a comparative advantage in high value agriculture 
production. However, to realize this comparative advantage and compete 
on international markets, Moldovan high value agriculture producers and 
the Government will need to: (1) Aggressively seek export market 
opportunities; (2) upgrade production and the post harvest supply 
chain; (3) improve the enabling environment and create conditions 
conducive to high value agriculture (including reducing restrictions on 
new seed varieties and on imports of fertilizers and agriculture 
equipments); and (4) improve Moldova's compliance with sanitary and 
phytosanitary standards and ability to meet international standards.
    To simplify implementation and increase efficiency, MCC Funding 
will be used to expand a planned USAID-administered agricultural 
development project and to target Transition to High Value Agriculture 
Project beneficiaries, such as producers within the rehabilitated 
systems and other value chain actors active in the high value 
agriculture markets. Subject to funding availability, USAID intends to 
contribute funding and administer and implement the program on behalf 
of MCA-Moldova and MCC. Specifically, MCC Funding will support the 
following tasks under the joint MCA-Moldova and USAID Growing High 
Value Agriculture Sales Activity:
    (1) Develop and Expand Market Opportunities for Moldovan High Value 
Agriculture Sub-Activity. This sub-activity will focus on identifying 
market opportunities and understanding buyer requirements and 
specifications, with the objective of increasing export sales and 
attracting regional buyers and private sector investment to Moldova. As 
a part of the process of facilitating transactions and promoting 
Moldova as a source of high value agriculture in the region, several 
approaches for establishing a sustainable yet flexible network of 
buyers will be developed and tested.
    (2) Training to Upgrade Production and Meet Buyer Requirements Sub-
Activity. This sub-activity will develop a field and classroom-based 
program to help value chain actors, with primary focus on producers and 
producer groups; better understand and meet buyer requirements; reduce 
production and marketing costs; capture price premiums; and increase 
sales through improved high value agriculture production, post-harvest, 
and marketing practices. Training will include assistance to farmers to 
promote sustainable agricultural practices, specifically pest 
management, and soil and water conservation. Moldovan agriculture 
service providers, supplemented with international sector specialists 
as required, will implement a no-fee training program targeting 
beneficiaries both inside and outside the rehabilitated systems.
    (3) Demand-Driven Technical Assistance to Upgrade the High Value 
Agriculture Value Chain Sub-Activity. This sub-activity is designed to 
support increased investment and improved performance in the high value 
agriculture value chain, with particular focus on the post-harvest 
infrastructure and equipment required to transition farmers to 
increased production of high value agriculture and enable producers, 
wholesalers and exporters to remain competitive and deliver fresh 
produce (properly packaged, stored and transported) to increasingly 
quality conscious buyers in the European Union, Commonwealth of 
Independent States, and domestic retail markets. A pre-approved group 
of local and international service providers will be established to 
provide customized consulting and business development services on a 
competitive, cost-sharing basis.
    (4) Implement Recommendations for an Improved Enabling Environment 
Sub-Activity. This sub-activity will augment on-going efforts by USAID 
and other donors to identify and implement needed policy reforms in the 
agriculture sector which will improve competiveness and increase or 
preserve access to export markets. This task will: (A) Provide 
technical assistance to help the Government adopt legislation and 
policies to implement reforms that support high value agriculture, with 
specific attention to improving access to (and reducing import tariffs 
on) quality seeds, fertilizers, and other inputs, including high value 
agriculture-related equipment; and (B) establish sanitary and 
phytosanitary standards systems and procedures to support exports and 
reduce the risks of export bans through narrowly targeted upgrades in 
Government sanitary and phytosanitary controls, including laboratory 
equipment. As part of this component, the Ministry of Agriculture and 
Food Industry will be required to provide refurbished laboratory space, 
in conditions acceptable to USAID.
    (b) Beneficiaries.
    By 2029, the Parties expect that the Transition to High Value 
Agriculture Project will have benefitted at least

[[Page 4861]]

124,000 individuals, or at least 31,000 households. Beneficiaries of 
the Transition to High Value Agriculture Project include households 
with owners or shareholders of farming enterprises, farmers or owners 
of land, producers and intermediaries investing in and working in the 
high agriculture value sector, and laborers employed in the operation 
of enterprise farms within the command areas where MCC will 
rehabilitate the irrigation systems and producers and agribusinesses 
outside the systems targeted for rehabilitation that are already 
engaged in the high value agriculture sector.
    Farm enterprises in the centralized irrigation system areas are 
expected to capture the majority of the Transition to High Value 
Agriculture Project's benefits. Up to 3,100 farm households are 
expected to benefit from the rehabilitation of centralized irrigation 
systems. Switching from non-irrigated to irrigated agriculture in 
Moldova can increase profitability by 200-500 percent or higher on a 
per hectare basis, depending on the crop mix. In the next 20 years, 
poor households could realize a cumulative increase in income 
equivalent to three years of current farm earnings, even with 
assumptions of gradual and partial adoption of irrigation. Individuals 
employed in seasonal labor will also benefit from the Transition to 
High Value Agriculture Project. Demand for seasonal labor is projected 
to increase as farms switch from grains to more labor-intensive high 
value agriculture crops. A projected 9,300 employees, most of whom are 
poor, will realize increased wage income due to greater demand for 
agricultural labor in the centralized irrigation system areas. 
Landowners will also benefit from the increased productivity and value 
of their land once it has access to irrigation. It is projected that 
approximately 15,500 individuals renting out their agricultural land 
will realize increased rent income of at least 20 percent.
    The Access to Agricultural Finance Activity will directly benefit 
more than 100 post-production investors. The Growing High Value 
Agriculture Sales Activity, which is intended to use USAID funds, 
subject to availability, and MCC Funding, will assist individuals in 
the centralized irrigation system areas, as well as an additional 2,000 
high value agriculture producers outside the centralized irrigation 
system areas, of whom at least 1,300 producers are expected to realize 
income gains. Additionally, the policy improvement and efforts to 
improve sanitary and phytosanitary standards of the Growing High Value 
Agriculture Sales Activity is expected to increase and safeguard 
incomes for all high value agriculture producers in Moldova, estimated 
at 83,000 households and 315,000 beneficiaries as of 2009.
    (c) Environmental and Social Mitigation.
    The Transition to High Value Agriculture Project is classified as 
``Category A'' according to MCC Environmental Guidelines because it 
could potentially result in significant, long-term direct, indirect, 
and cumulative environmental and social impacts, including impacts to 
two international waterways. Environmental and social impact 
assessments have been initiated, which will inform detailed project 
design and establish environmental management plans and resettlement 
policy framework or action plans to be implemented during the 
construction and operation phases of the project
    The Access to Agricultural Finance Activity will be designed and 
implemented in accordance with requirements set forth in MCC 
Environmental Guidelines for ``Category D'' (financial intermediary) 
projects, requiring pre-screening of loan applications for 
environmental and social impacts as part of the approval process. MCC 
Environmental Guidelines under Category D reserves for MCC the ``right 
to set additional performance standards and monitoring requirements for 
subprojects on a case-by-case basis, depending on the nature of the 
intermediate facility.''
    (d) Donor Coordination.
    MCC has coordinated closely with the two donors most active in the 
agriculture sector in Moldova--USAID and the World Bank--on the 
Transition to High Value Agriculture Project. MCC has also worked 
closely with the European Union, World Bank, Organization for Economic 
Co-operation and Development, and the United Nations Development Fund 
for Women on environmental and social issues such as water resource 
management and gender. Further, the World Bank Mission in Chisinau, 
Moldova, and World Bank sector and regional specialists in Washington, 
DC, have provided contacts, studies, lessons learned, and informal peer 
review at all stages in the process starting with early concerns about 
land tenure and consolidation issues. Input and collaboration between 
the World Bank and MCC have been the most significant and influential 
in the development of the access to agricultural finance, irrigation 
management transfer, and food safety components and interventions.
    Also significant is the successful partnership between USAID, MCC 
and MCA-Moldova. USAID and MCC worked together to develop a joint 
project designed to build on USAID's 15 years of experience in the 
agriculture sector and, at the same time, support the significant MCC 
irrigation infrastructure investment. Subject to the availability of 
funds, the joint Growing High Value Agriculture Sales Activity is 
intended to provide the technical assistance and market development 
support needed to help producers transition to high value agriculture 
fruit and vegetable crops. The Growing High Value Agriculture Sales 
Activity, which will target, but will not be limited to, areas where 
MCC irrigation rehabilitation will occur, is designed to emphasize 
promotion of market opportunities within Moldova and encourage 
increased private sector and foreign investment in the high value 
agriculture sector. Subject to the availability of funds, USAID intends 
to contribute funding for the Growing High Value Agriculture Sales 
Activity, which would be administered by USAID on behalf of MCA-
Moldova. This joint approach addresses and reduces implementation 
capacity concerns by allowing for improved implementation and project 
oversight and more efficient use of resources.
    (e) Sustainability.
    The Transition to High Value Agriculture Project is designed as a 
comprehensive project that will increase farmer incomes and break the 
cycle of poor water service, low water tariff revenue, underinvestment 
in irrigation system maintenance, and low investment by farmers in high 
value agriculture. Each of the four activities reinforces the other in 
ensuring project sustainability and building the capacity of local 
institutions and service providers.
    The Irrigation Sector Reform Activity, and its Irrigation 
Management Transfer Sub-Activity and River Basin Management Sub-
Activity, are designed to ensure that the rehabilitated centralized 
irrigation systems (MCC's primary high value agriculture investment) 
are effectively operated and maintained through the transfer of 
responsibility for operations and maintenance to the WUAs. A condition 
for commencing rehabilitation of these systems is the passage of a WUA 
Law that will support the legal transfer of responsibility for 
Government owned assets to WUAs. The WUA Law will require that WUA 
membership represents at least 50 percent of the users and 50 percent 
of the intended service area of the WUA. The WUA Law will also empower 
the WUAs with the

[[Page 4862]]

authority to establish and collect water tariffs sufficient to cover 
their fixed costs and ensure financial stability of the rehabilitated 
systems. The River Basin Management Sub-Activity will provide a 
comprehensive approach to water management to build the Government's 
capacity to ensure that water resources are effectively managed over 
the long term.
    The Access to Agricultural Finance Activity and Growing High Value 
Agriculture Sales Activity address the need to upgrade production and 
the high value agriculture value chain in order for Moldovan high value 
agriculture producers to become and remain competitive in the long 
term. It will also promote water and soil conservation, integrated pest 
management, and other sustainable agricultural practices. Both of these 
activities are driven by market signals and demand from the value chain 
actors, ensuring that the most appropriate and targeted training and 
technical assistance is provided. Technical assistance programs in both 
activities will utilize local service providers whenever possible, and 
will provide training to those local service providers so that they are 
able to sustainably serve the market after the Compact is completed. 
The High Value Agriculture Post-Harvest Credit Facility is intended to 
extend beyond the end of the Compact to facilitate issuance of loans 
extending beyond the Compact.
    (f) Policy, Legal and Regulatory Reforms.
    Regulatory reform is required for the success of the Transition to 
High Value Agriculture Project. The publication in the ``Monitorul 
Oficial'' of the WUA Law acceptable to MCC, which law will be in full 
force and effect no later than three months after the date of 
publication, is a condition precedent to signing the detailed design 
studies contract for the centralized irrigation system rehabilitation. 
Registration of WUAs to operate and maintain the centralized irrigation 
systems to be rehabilitated, and publication in the ``Monitorul 
Oficial'' of the Water Law acceptable to MCC are conditions precedent 
to commencement of procurement for the centralized irrigation system 
construction works contract.
2. Road Rehabilitation Project
    (a) Summary of Project and Activities.
    The objectives of the Road Rehabilitation Project (the ``Road 
Rehabilitation Project'') are to: (i) Increase incomes of the local 
population by reducing the cost of transport, goods and services; (ii) 
reduce losses to the national economy resulting from the deteriorated 
road conditions; and (iii) reduce the number of road accidents through 
improved traffic conditions. Rooted in the National Development 
Strategy and the Land Transport Infrastructure Strategy (2008-2017), 
the Road Rehabilitation Project was developed with the assistance of 
external partners in the road sector (World Bank, European Bank for 
Reconstruction and Development, European Investment Bank, European 
Commission, and MCC, collectively the ``Joint Group''). The strategy 
recommends the rehabilitation of the major trans-national axis that 
crosses Moldova from north to south.
    The Road Rehabilitation Project will improve part of the M2 \1\ 
road (``M2''), which is an arterial highway from the Moldovan capital, 
Chisinau, through the city of Soroca, to the Ukrainian border and 
beyond to Kyiv, the Ukrainian capital. This route contains significant 
traffic flows, serves as a significant link between Moldova and Ukraine 
for private, passenger, and commercial traffic, and has been 
prioritized by the Government for rehabilitation.
---------------------------------------------------------------------------

    \1\ As referenced, the M2 includes approximately 9 km of the R7 
road.
---------------------------------------------------------------------------

    The Road Rehabilitation Project consists of the following:
    (i) M2 Road Activity.
    MCC Funding will be used to rehabilitate and upgrade a 93 km 
portion of the M2, beginning near Sarateni at the southern end and 
ending at the junction with the R7 road west to Drochia (the ``Drochia 
junction'') at the northern end (the ``M2 Road Activity''). MCC Funding 
will also be used to replace or upgrade associated structures within 
this segment of the M2, such as bridges, drainage systems and culverts, 
to improve road maintenance and safety. The M2's improvement is 
expected to reduce vehicle operating costs, reduce travel time, change 
maintenance costs, cause an increase in the value of goods moved and 
cause an increase in frequent travel. Specifically, MCC Funding will 
support:
    (1) Construction costs: These costs include, without limitation, 
pavement rehabilitation and strengthening, embankment construction, 
road safety improvements, replacement or upgrading of associated 
structures, such as bridges, drainage systems and culverts, and any 
activity associated with the environmental management plan developed 
with respect to the Activity.
    (2) Non-construction costs: These costs include, without 
limitation, studies, construction supervision, environmental and social 
mitigation (including resettlement), and other project management costs 
and technical assistance to be incurred in connection with the M2 Road 
Activity.
    (ii) Supplemental Feasibility Study/ESIA and Design.
    MCC Funding will also be used for a feasibility study/environmental 
and social impact assessment for the road segment from Arionesti to the 
border crossing in Otaci, detailed design work, a resettlement action 
plan and an updated environmental and social impact assessment for the 
entire road section from the Drochia junction to the border crossing in 
Otaci.
    (b) Beneficiaries.
    The M2 Road Activity is expected to benefit approximately 78,000 
households over the next 20 years, or approximately 302,000 
beneficiaries. Rehabilitation of the M2 will benefit the users and 
owners of motorized vehicles utilizing the road, including local 
agricultural and other producers and buyers; providers and users of 
passenger transport services; and non-commercial owners of private 
motorized transport. In addition, sellers and merchandisers of products 
transported along this road will likely benefit. At present there are 
approximately 273,000 beneficiaries living along the road, and 
approximately 29,000 individuals from the road rehabilitation outside 
the region. Over 20 years, poor beneficiary households (earning less 
than US$2 purchasing power parity (``PPP'') per day per capita) could 
realize a cumulative increase in income equivalent to more than one 
year of current income. Taking into account traffic originating from 
and destined for areas outside the adjacent areas, the beneficiary 
analysis estimates that about 15 percent of the beneficiaries of the 
investment will be among households that now live on less than US$2 per 
person per day (in PPP terms).
    (c) Environmental and Social Mitigation.
    The M2 Road Activity is classified as ``Category B'' according to 
MCC Environmental Guidelines. The M2 Road Activity is expected to 
produce site-specific and limited environmental and social impacts that 
can be mitigated and monitored. An environmental and social impact 
assessment has been initiated which will inform detailed product design 
and establish an environmental management plan and resettlement policy 
framework and action plans for construction.
    (d) Donor Coordination.
    In addition to general coordination with the Joint Group, the Road 
Rehabilitation Project will benefit from

[[Page 4863]]

technical assistance being provided to the State Road Administration 
through the Road Sector Support Program funded by an approximate US$5 
million World Bank credit. The program will fund consulting services 
for design and introduction of an axle load control system; consulting 
services for reform of road maintenance execution arrangements 
(including road asset valuation); technical and financial audits; 
support by local consultants in the areas of procurement, environment, 
and financial management; and training activities.
    (e) Sustainability.
    Sustainability of the Road Rehabilitation Project requires both 
routine and periodic maintenance, which can only be accomplished if 
there is adequate funding and if appropriate mechanisms are in place to 
carry out the maintenance. A lack of maintenance is evidenced by the 
state of deterioration of the road. At least 50 percent of the road 
needs to be reconstructed from the sub-base. Most of the bridges show 
severe corrosion of the reinforcement bars, causing a loss of required 
strength and concrete spalling.
    The Government, with the assistance of the Joint Group, had adopted 
the Land Transport Infrastructure Strategy, which, along with other 
points, addresses the current deficiencies in road maintenance funding 
and execution. In particular, the Government committed in writing in 
February 2008 to amend the Road Fund Law to ensure that an adequate 
percentage of the revenue from the fuel excise tax, sources of revenue 
introduced in large part to fund road maintenance, would be 
automatically allocated to the Road Fund.
    To increase the likelihood of sustaining the benefits of the 
rehabilitated M2, and to prepare a more sustainable basis for future 
investments in the roads sector, the Government will provide MCC with 
evidence that an amended Road Fund Law, providing a more reliable 
mechanism for adequate road maintenance funding, is in full force and 
effect, before invitations for construction bids are issued under the 
Compact. Measurable progress monitors are set forth in the Program 
Implementation Agreement as conditions precedent to disbursement for 
the Road Rehabilitation Project.
    (f) Policy, Legal and Regulatory Reforms.
    Policy, legal, and regulatory reforms are required to implement the 
Road Rehabilitation Project. As a condition precedent to commencement 
of procurement for construction, the Government will ensure the 
amendment of the Road Fund Law to provide sustainable funding for 
adequate road maintenance.
3. Implementation Framework
    (a) Overview.
    The implementation framework and the plan for ensuring adequate 
governance, oversight, management, monitoring and evaluation, and 
fiscal accountability for the use of MCC Funding are summarized below. 
MCC and the Government will enter into the Program Implementation 
Agreement, and any other agreements in furtherance of this Compact, all 
of which, together with this Compact, set out certain rights, 
responsibilities, duties and other terms relating to the implementation 
of the Program.
    (b) MCC.
    MCC will take all appropriate actions to carry out its 
responsibilities in connection with this Compact and the Program 
Implementation Agreement, including the exercise of its approval rights 
in connection with the implementation of the Program.
    (c) MCA-Moldova.
    In accordance with Section 3.2(b) of this Compact, MCA-Moldova will 
act on the Government's behalf to implement the Program and to exercise 
and perform the Government's rights and responsibilities with respect 
to the oversight, management, monitoring and evaluation, and 
implementation of the Program, including, without limitation, managing 
the implementation of Projects and their Activities, allocating 
resources, and managing procurements. The Government will ensure that 
MCA-Moldova takes all appropriate actions to implement the Program, 
including the exercise and performance of the rights and 
responsibilities designated to it by the Government pursuant to this 
Compact and the Program Implementation Agreement. Without limiting the 
foregoing, the Government will also ensure that MCA-Moldova has full 
decision-making autonomy, including, inter alia, the ability, without 
consultation with, or the consent or approval of, any other party, to 
(i) Enter into contracts in its own name, (ii) sue and be sued, (iii) 
establish an account in a financial institution in the name of MCA-
Moldova and hold MCC Funding in that account, (iv) expend MCC Funding, 
(v) engage a fiscal agent who will act on behalf of MCA-Moldova on 
terms acceptable to MCC, (vi) engage one or more procurement agents who 
will act on behalf of MCA-Moldova, on terms acceptable to MCC, to 
manage the acquisition of the goods, works, and services required by 
MCA-Moldova to implement the activities funded by this Compact, and 
(vii) competitively engage one or more auditors to conduct audits of 
its accounts. The Government will take the necessary actions to 
establish MCA-Moldova, in accordance with the applicable conditions 
precedent to the disbursement of Compact Implementation Funding set 
forth in Annex IV to this Compact.
    MCA-Moldova will be administered and managed by a Steering 
Committee and a Management Unit. In addition, MCA-Moldova will have the 
Consultative Group to continue the consultative process during 
implementation of the Program. The governance of MCA-Moldova will be 
set forth in more detail in the Establishment Decree, the Program 
Implementation Agreement, and the internal regulations of MCA-Moldova 
(``MCA-Moldova Bylaws''), which will, collectively, set forth the 
responsibilities of the Steering Committee, the Consultative Group and 
the Management Unit. The MCA-Moldova Bylaws will be developed and 
adopted in accordance with MCC's Guidelines for Accountable Entities 
and Implementation Structures, published on the MCC Web site (the 
``Governance Guidelines''), and will be in form and substance 
satisfactory to MCC.
    (i) Steering Committee.
    (1) Composition. MCA-Moldova will be governed by the steering 
committee, or the board of directors (the ``Steering Committee''), 
which will consist of voting members representing those Government 
ministries and civil society and private sector organizations set forth 
in the Establishment Decree. The Steering Committee will also consist 
of those non-voting observers set forth in the Establishment Decree. 
All voting members will be selected in accordance with the MCA-Moldova 
Bylaws and must be sufficiently senior and qualified to make decisions 
on behalf of their respective ministries and civil society and private 
sector organizations, as applicable. Each voting member named to serve 
on the Steering Committee, and any replacement for any voting member or 
any alteration of the size or composition of the Steering Committee, 
will be subject to MCC prior approval. In the event that none of the 
civil society and private sector organizations represented as voting 
members on the Steering Committee are from an environmentally focused 
non-governmental organization, an additional observer from such an 
organization, subject to the prior receipt of a no-objection notice 
from MCC, will be appointed.
    (2) Roles and Responsibilities. The Steering Committee will be 
responsible for overseeing the implementation of the

[[Page 4864]]

Program and will have final decision-making authority over the 
implementation of the Program. The Steering Committee will meet 
regularly; the frequency of meetings will be set forth in the MCA-
Moldova Bylaws and will be in accordance with the Governance 
Guidelines. The specific roles of the voting members and non-voting 
observers will be set forth in the Establishment Decree and the MCA-
Moldova Bylaws.
    (ii) Consultative Group.
    (1) Composition. Pursuant to the Establishment Decree, the 
composition of the consultative group will be selected in accordance 
with the MCA-Moldova Bylaws and the Governance Guidelines and subject 
to MCC approval (the ``Consultative Group''). Without limiting the 
foregoing, the Establishment Decree provides that the Consultative 
Group will be composed of, inter alia, Program beneficiaries, regional 
and local government representatives, entities with an interest or 
involvement in the implementation of the Program, and any applicable 
civil society and private sector representatives. In addition, the 
Steering Committee may establish regional, informal consultative groups 
in the project intervention zones composed of, inter alia, Program 
beneficiaries, regional and local government representatives, entities 
with an interest or involvement in the implementation of the Program, 
and any applicable civil society and private sector representatives. 
The establishment and composition of any such regional, informal 
consultative groups will also be subject to MCC approval.
    (2) Roles and Responsibilities. Consistent with the Governance 
Guidelines, the Consultative Group (and any informal, regional 
stakeholders committees established by the Steering Committee) will be 
responsible for continuing the consultative process throughout 
implementation of the Program. While the Consultative Group (and any 
informal, regional stakeholders committees established by the Steering 
Committee) will not have any decision-making authority, it will be 
responsible for, inter alia, reviewing, at the request of the Steering 
Committee or the Management Unit, certain reports, agreements, and 
documents related to the implementation of the Program in order to 
provide advice and input to MCA-Moldova regarding the implementation of 
the Program.
    (iii) Management Unit.
    (1) Composition. The management unit, which will be led by a 
competitively selected Executive Director, will be composed of 
competitively selected staff with expertise in the key components of 
the Program, including, without limitation, a Road Rehabilitation 
Project Director, Transition to High Value Agriculture Director, 
Centralized Irrigation System Rehabilitation Activity Director, as well 
as a Deputy Executive Director, a Legal Advisor, and other key 
Directors, including, without limitation, a Finance and Administrative 
Director, Communications and Documentation Director, a Procurement 
Director, a Monitoring and Evaluation Director, Environmental and 
Social Director, and Social and Gender Officer (the ``Management 
Unit''). The Management Unit will also include such other personnel as 
provided for in the MCA-Moldova Bylaws. The directors will be supported 
by appropriate additional staff to enable the Management Unit to 
execute its roles and responsibilities.
    (iv) Roles and Responsibilities. The Management Unit will be based 
in Chisinau, Moldova, and will be responsible for managing the day-to-
day implementation of the Program, with oversight from the Steering 
Committee. The Management Unit will serve as the principal link between 
MCC and the Government, and will be accountable for the successful 
execution of the Program, each Project, and each Activity. As a 
Government entity, MCA-Moldova will be subject to Government audit 
requirements. As a recipient of MCC Funding, MCA-Moldova will also be 
subject to MCC audit requirements.
    (d) Implementing Entities.
    Subject to the terms and conditions of this Compact and any other 
related agreements entered into in connection with this Compact, the 
Government and MCC have identified certain principal public 
institutions that may or will serve as implementing entities (each, an 
``Implementing Entity'') to implement and carry out certain Projects 
and/or Activities (and/or any component thereof) in furtherance of this 
Compact. Any Implementing Entity will be subject to review and approval 
by MCC. The Government will ensure that the roles and responsibilities 
of each Implementing Entity and other appropriate terms are set forth 
in an agreement between MCA-Moldova and each Implementing Entity, which 
agreement must be in form and substance satisfactory to MCC (each an 
``Implementing Entity Agreement'').
    (e) Fiscal Agent.
    Unless MCC otherwise agrees in writing, the Government, directly or 
through MCA-Moldova, will engage a fiscal agent (a ``Fiscal Agent''), 
who will be responsible for assisting the Government with its fiscal 
management and ensure appropriate fiscal accountability of MCC Funding, 
and whose duties will include those set forth in the Program 
Implementation Agreement.
    (f) Procurement Agent.
    Unless MCC otherwise agrees in writing, the Government, directly or 
through MCA-Moldova, will engage one or more procurement agents (each, 
a ``Procurement Agent'') to carry out and certify specified procurement 
activities in furtherance of this Compact. The roles and 
responsibilities of each Procurement Agent will be set forth in the 
Program Implementation Agreement or such agreement as the Government, 
directly or through MCA-Moldova, enters into with each Procurement 
Agent, which agreement will be in form and substance satisfactory to 
MCC. Each Procurement Agent will adhere to the procurement standards 
set forth in the MCC Program Procurement Guidelines and ensure 
procurements are consistent with the procurement plan adopted by MCA-
Moldova pursuant to the Program Implementation Agreement, unless MCC 
otherwise agrees in writing.

Annex II--Multi-Year Financial Plan Summary

    This Annex II summarizes the Multi-Year Financial Plan for the 
Program.

1. General

    A multi-year financial plan summary (``Multi-Year Financial Plan 
Summary'') is attached hereto as Exhibit A. By such time as is 
specified in the PIA, the Government will adopt, subject to MCC 
approval, a multi-year financial plan that includes, in addition to the 
multi-year summary of estimated MCC Funding and the Government's 
contribution of funds and resources, the annual and quarterly funding 
requirements for the Program (including administrative costs) and for 
each Project, projected both on a commitment and cash requirement basis 
(``Multi-Year Financial Plan'').

Exhibit A--Multi-Year Financial Plan Summary

[[Page 4865]]



                                               Multi-Year Financial Plan Summary--Projected Disbursements
                                                                          (US$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                 Project                   Prior to EIF       Year 1          Year 2          Year 3          Year 4          Year 5           Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Transition to High Value Agriculture (THVA) Project
--------------------------------------------------------------------------------------------------------------------------------------------------------
Activity 1.1: Rehabilitation of
 Centralized Irrigation Systems (CIS)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Activity 1.2: Irrigation Sector Reform
 (ISR)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Activity 1.3: Access to Agricultural
 Finance (AAF)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Activity 1.4: Growing High Value
 Agriculture Sales (GHS)
                                         ---------------------------------------------------------------------------------------------------------------
    Sub-Total...........................         511,803       8,607,776      19,560,020      30,880,103      28,323,440      13,890,259     101,773,401
--------------------------------------------------------------------------------------------------------------------------------------------------------
2. Road Rehabilitation Project
--------------------------------------------------------------------------------------------------------------------------------------------------------
Activity 2.1: M2 Sarateni--Drochia
 Junction
--------------------------------------------------------------------------------------------------------------------------------------------------------
Activity 2.2: M2 Drochia Junction--Otaci
 Studies
                                         ---------------------------------------------------------------------------------------------------------------
    Sub-Total...........................          37,500       2,037,500      26,278,000      52,206,000      39,142,000      13,139,000     132,840,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
3. Monitoring and Evaluation (M&E)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Monitoring and Evaluation
                                         ---------------------------------------------------------------------------------------------------------------
    Sub-Total...........................          20,000         489,250         310,844         939,745         399,556       1,379,536       3,538,931
--------------------------------------------------------------------------------------------------------------------------------------------------------
4. Program Administration and Audit
--------------------------------------------------------------------------------------------------------------------------------------------------------
MCA-Moldova
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal Agent/Procurement Agent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Audit
                                         ---------------------------------------------------------------------------------------------------------------
    Sub-Total...........................         362,691       4,822,771       4,680,772       4,554,660       4,750,702       4,676,072      23,847,668
                                         ---------------------------------------------------------------------------------------------------------------
        Grand Total.....................      \2\931,994      15,957,297      50,829,636      88,580,508      72,615,698      33,084,867     262,000,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

Annex III--Description of Monitoring and Evaluation Plan

    This Annex III (this ``M&E Annex'') generally describes the 
components of the Monitoring and Evaluation Plan (``M&E Plan'') for the 
Program. The actual content and form of the M&E Plan will be agreed to 
by MCC and the Government in accordance with the Program Implementation 
Agreement. The M&E Plan may be modified from time to time with MCC 
approval without requiring an amendment to this Annex III.
---------------------------------------------------------------------------

    \2\ Total commitments of Compact Implementation Funding are 
expected to be approximately US$8.0 million. Disbursement of Compact 
Implementation Funding will continue after entry into force of the 
Compact.
---------------------------------------------------------------------------

1. Overview

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

2. Program Logic

    The M&E Plan will be built on a logic model which illustrates how 
the

[[Page 4866]]

Program, Projects and Activities contribute to the Compact Goal, the 
Program Objective and the Project Objectives.

3. Monitoring Component

    To monitor progress toward the achievement of the impact and 
outcomes, the Monitoring Component of the M&E Plan will identify (a) 
The Indicators (as defined below), (b) the definitions of the 
Indicators, (c) the sources and methods for data collection, (d) the 
frequency for data collection, (e) the party or parties responsible, 
and (f) the timeline for reporting on each Indicator to MCC.
    Further, the Monitoring Component will track changes in the 
selected Indicators for measuring progress towards the achievement of 
the objectives during the Compact Term. The M&E Plan will establish 
baselines which measure the situation prior to a development 
intervention, against which progress can be assessed or comparisons 
made (each a, ``Baseline''). MCA-Moldova will collect Baselines on the 
selected Indicators or verify already collected Baselines where 
applicable and as set forth in the M&E Plan.
    (a) Indicators. The M&E Plan will measure the results of the 
Program using quantitative, objective and reliable data 
(``Indicators''). Each Indicator will have benchmarks that specify the 
expected value and the expected time by which that result will be 
achieved (``Target''). The M&E Plan will be prepared in accordance with 
the MCC Policy for Monitoring and Evaluation of Compacts and Threshold 
Programs. All Indicators will be disaggregated by gender, income level 
and age, and beneficiary types to the extent practicable. Subject to 
prior written approval from MCC, MCA-Moldova may add Indicators or 
refine the definitions and Targets of existing Indicators.
    (i) Compact Indicators.
    (1) Goal. The M&E Plan will contain the following Indicators 
related to the Compact Goal. The Target of these Indicators are 
national goals as specified in Moldova's ``National Development 
Strategy'' to which the Project contributes, but are not solely 
attributable to the Project:
    (A) Absolute poverty rate nationwide: 30.2 percent to 20.0 percent 
by year 2015; and
    (B) Absolute rural poverty rate: 34.1 percent to 22.6 percent by 
year 2015.
    (2) Other Indicators. The M&E Plan will contain the Indicators 
listed in the following tables.

                   Table 1--Transition to High Value Agriculture Project Objective Indicators
----------------------------------------------------------------------------------------------------------------
                                                              Definition of
              Result                      Indicator             indicator         Baseline \3\        Year 5
----------------------------------------------------------------------------------------------------------------
Incomes increase due to transition  Increase in the       Total annual profits              180              390
 to high value agriculture           annual profits of     of crop production
 interventions.                      crop production per   in areas targeted
                                     hectare.              by the Centralized
                                                           Irrigation System
                                                           Rehabilitation
                                                           Activity (``Target
                                                           Areas'') (excluding
                                                           rent and labor
                                                           cost)/total Target
                                                           Areas (US$) \4\.
                                    Increase in the rent  Average rent paid by               80              100
                                     for land paid to      lessee to lessor
                                     lessors per hectare.  per hectare of
                                                           rented land in
                                                           Target Areas (US$)
                                                           \5\.
                                    Increase in the wage  Value of labor                     40              180
                                     bill paid to labor    (total person-days
                                     per hectare.          of labor x average
                                                           daily wage
                                                           excluding household
                                                           labor) per annum/
                                                           total Target Areas
                                                           (US$) \6\.
                                    Increase in the       Percent differential               NA              20%
                                     annual profits        between the annual
                                     among assisted        per hectare profit
                                     farms outside of      (excluding rent and
                                     Target Areas.         labor costs)
                                                           realized among
                                                           assisted farms
                                                           outside of Target
                                                           Areas and a
                                                           comparison farm
                                                           group.
Moldova has examples of a model     Increase in the area  Number of hectares              1,100            3,460
 for transition to high value        irrigated in Target   of irrigated crops
 agriculture in centrally            Areas.                (high value
 irrigated areas and an enabling                           agriculture, grains
 environment (legal, financial,                            and technical
 and market) for replication of                            crops) in Target
 the model.                                                Areas \7\.
                                    Adoption of HVA       Number of hectares              1,800            2,840
                                     crops in Target       of irrigated and
                                     Areas.                non-irrigated high
                                                           value agriculture
                                                           crops (fruits,
                                                           grapes, vegetables,
                                                           potatoes, etc.) in
                                                           Target Areas \8\.
----------------------------------------------------------------------------------------------------------------


                 Table 1.1--Rehabilitation of Centralized Irrigation Systems Activity Indicators
----------------------------------------------------------------------------------------------------------------
                                                              Definition of
              Result                      Indicator             indicator         Baseline \9\        Year 5
----------------------------------------------------------------------------------------------------------------
                                            Outcome Level Indicators
----------------------------------------------------------------------------------------------------------------
Rehabilitated centralized           Command area with     Hectares of                     1,100           15,500
 irrigation systems can serve a      access to             agricultural land
 large agricultural area.            functional systems    with access to the
                                     expands.              functional
                                                           centralized
                                                           irrigation systems
                                                           rehabilitated under
                                                           Compact.
----------------------------------------------------------------------------------------------------------------

[[Page 4867]]

 
                                             Output Level Indicators
----------------------------------------------------------------------------------------------------------------
Rehabilitated centralized           Centralized           Number of                          NA               11
 irrigation systems can serve a      irrigation systems    centralized
 large agricultural area.            rehabilitated.        irrigation systems
                                                           with rehabilitation
                                                           works completed
                                                           under Compact.
----------------------------------------------------------------------------------------------------------------


                             Table 1.2--Irrigation Sector Reform Activity Indicators
----------------------------------------------------------------------------------------------------------------
                                                       Definition of
             Result                   Indicator          indicator            Baseline              Year 5
----------------------------------------------------------------------------------------------------------------
                                            Outcome Level Indicators
----------------------------------------------------------------------------------------------------------------
Management of centralized        WUAs established    Number of WUAs     NA.................  11
 irrigation systems shifted to    under new law.      registered under
 users.                                               new specific
                                                      WUAs law.
                                 MTAs signed.......  Number of MTAs     NA.................  11
                                                      signed between
                                                      the Government,
                                                      assisted WUAs,
                                                      and MCA-Moldova.
Effective governance and         Improved            Percentage of      41.................  75
 management in systems            perception of       centralized
 rehabilitated under the          quality of          irrigation
 Compact.                         service by water    systems users
                                  users.              satisfied with
                                                      the timeliness,
                                                      cost and
                                                      administration
                                                      of irrigation
                                                      \10\.
                                 ..................
WUAs achieving financial         Number of assisted  NA...............  11 or all systems
 sustainability.                  WUAs where                             rehabilitated.
                                  tariffs collected
                                  covers 100% of
                                  operating costs
                                  plus an amount
                                  for capital/
                                  replacement costs.
                                 ..................
Active and representative        Number of WUAs      NA...............  11 or all systems
 governance.                      with annual plans                      rehabilitated.
                                  and year end
                                  reports approved
                                  by their
                                  respective
                                  general
                                  assemblies.
                                 ..................
Gender-balanced WUAs'            Number of WUAs      NA...............  9 or 80% of systems
 management and governance.       having at least                        rehabilitated.
                                  20% of board
                                  member positions
                                  filled by women.
Enhanced management of water     Revised water       The Water Law      Water Law            Water Law in full
 resources based on river basin   management policy   which              circulated for       force and effect.
 management.                      framework--with     establishes long-  comments.
                                  long-term water     term water
                                  rights defined--    rights is in
                                  established.        full force and
                                                      effect.
----------------------------------------------------------------------------------------------------------------


                       Table 1.3--Access to Agricultural Finance Activity Indicators \11\
----------------------------------------------------------------------------------------------------------------
                                                              Definition of
              Result                      Indicator             indicator           Baseline          Year 5
----------------------------------------------------------------------------------------------------------------
                                            Outcome Level Indicators
----------------------------------------------------------------------------------------------------------------
Post-harvest infrastructure and     New high value        Operational cold-                   0      \12\10,500.
 equipment is in place to support    agriculture post-     storage capacity of
 increases in high value             harvest               high value
 agriculture.                        infrastructure and    agriculture post-
                                     equipment operating   harvest structures
                                     effectively.          financed under the
                                                           Access to
                                                           Agriculture Finance
                                                           Activity (metric
                                                           tons).
                                                          Percentage of the                   0               75
                                                           financed amount of
                                                           the investment
                                                           deemed to be
                                                           additional \13\.
Investment Development Support      New agricultural      Number of                           0               55
 Services facilitate creation of     loans resulting       agricultural loans
 post-harvest enterprises and        from Investment       received by
 result in new jobs.                 Development           borrowers which
                                     Services.             received support
                                                           from Investment
                                                           Development
                                                           Services.
----------------------------------------------------------------------------------------------------------------
                                             Output Level Indicators
----------------------------------------------------------------------------------------------------------------
Farmers and agricultural            Affordable financing  Amount of loans                     0       14,900,000
 businesses have enhanced access     provided for post-    provided under the
 to affordable and adequate          harvest               Access to
 finance.                            infrastructure        Agriculture Finance
                                     through the High      Activity for post-
                                     Value Agriculture     harvest
                                     Post-Harvest Credit   infrastructure
                                     Facility.             (US$).
----------------------------------------------------------------------------------------------------------------


[[Page 4868]]


          Table 1.4--Growing High Value Agriculture Sales (USAID-Administered) Activity Indicators \14\
----------------------------------------------------------------------------------------------------------------
                                                          Definition of
             Result                    Indicator            indicator          Baseline            Year 5
----------------------------------------------------------------------------------------------------------------
                                            Outcome Level Indicators
----------------------------------------------------------------------------------------------------------------
Trade relations of Moldovan high  Value of sales       Value of annual                  NA  10,500,000
 value agriculture suppliers are   facilitated.         sales facilitated
 enhanced due to promotion                              by the Activity
 activities.                                            contractor on
                                                        behalf of
                                                        Moldovan
                                                        producers or
                                                        producer groups
                                                        (US$).
----------------------------------------------------------------------------------------------------------------
Farmers, producer business        Farmers apply        Number of farmers                NA  2,800
 cooperatives, and exporters       acquired knowledge.  adopting
 meet buyer requirements, lower                         practices
 costs, capture price premiums,                         presented through
 and increase sales due to                              technical
 technical assistance.                                  assistance
                                                        programs, among
                                                        farmers within
                                                        Target Areas and
                                                        farmers outside
                                                        Target Areas
                                                        under the Growing
                                                        High Value
                                                        Agriculture Sales
                                                        Activity.
Enabling environment for high     Reduced risk of      Moldova sanitary                 NA  Audit ``passed.''
 value agriculture production      export bans due to   and phytosanitary
 and export market access is       improved export      services achieve
 improved due to implementation    certification and    compliance with
 of policy and sanitary and        inspection systems.  IPPC, ISPM
 phytosanitary standards                                Guidelines 7, 20
 recommendations.                                       and 23 and the
                                                        Central
                                                        Phytosanitary
                                                        Laboratory is
                                                        certified to ISO
                                                        9000 standards as
                                                        confirmed by an
                                                        independent
                                                        auditor.
----------------------------------------------------------------------------------------------------------------


                                     Table 2--Road Rehabilitation Indicators
----------------------------------------------------------------------------------------------------------------
                                                       Definition of
             Result                   Indicator          indicator            Baseline              Year 5
----------------------------------------------------------------------------------------------------------------
                                           Objective Level Indicators
----------------------------------------------------------------------------------------------------------------
Transportation conditions are    Reduced costs to    Value of time      0..................  112,000,000
 enhanced.                        road users.         savings and
                                                      reduced vehicle
                                                      operating costs
                                                      with the project
                                                      compared to no
                                                      rehabilitation
                                                      (modeled by
                                                      HDM4) (US$).
                                 Increased           Average annual     3,009..............  4,270.
                                  vehicular           daily traffic on
                                  activity.           the road segment
                                                      rehabilitated
                                                      under Compact.
----------------------------------------------------------------------------------------------------------------
                                            Outcome Level Indicators
----------------------------------------------------------------------------------------------------------------
Road quality is improved.......  Improved            International      12.................  2.
                                  international       roughness index
                                  roughness index.    for the road
                                                      segment
                                                      rehabilitated
                                                      under Compact
                                                      \15\.
----------------------------------------------------------------------------------------------------------------
Road network is sustainably      Revised             Appropriate        Draft Road Fund Law  Road Fund Law in
 maintained.                      legislative basis   legislation is     has been presented   full force and
                                  for road            in full force      to the Joint Group   effect.
                                  maintenance         and effect in      of external
                                  funding designed    accordance with    partners.
                                  to meet the needs   the Program
                                  for                 Implementation
                                  sustainability of   Agreement to
                                  roads               ensure a
                                  infrastructure.     sufficient
                                                      percentage of
                                                      revenue from the
                                                      fuel excise tax
                                                      is automatically
                                                      allocated to the
                                                      Road Fund.
----------------------------------------------------------------------------------------------------------------
                                             Output Level Indicators
----------------------------------------------------------------------------------------------------------------
Roads are rehabilitated........  Total length of     Total length of    0..................  93.
                                  roads               road sections
                                  rehabilitated.      rehabilitated
                                                      (km).
----------------------------------------------------------------------------------------------------------------

    (b) Data Collection and Reporting. The M&E Plan will establish 
guidelines for data collection and reporting, and identify the 
responsible parties. Compliance with data collection and reporting 
timelines will be conditions for Disbursements for the relevant Project 
Activities as set forth in the Program Implementation Agreement. The 
M&E Plan will specify the data collection methodologies, procedures, 
and analysis required for reporting on results at all levels. The M&E 
Plan will describe any interim MCC approvals for data collection, 
analysis, and reporting plans.
    (c) Data Quality Reviews. As determined in the M&E Plan or as 
otherwise requested by MCC, the quality of the data gathered through 
the M&E Plan will be reviewed to ensure that data reported are as 
valid, reliable, and timely as resources will allow. The objective of 
any data quality review will be to verify the quality and the 
consistency of performance data across

[[Page 4869]]

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.
---------------------------------------------------------------------------

    \3\ All currency figures are in 2009 values using a market 
conversion rate of 10.52 MDL/US$.
    \4\ After Year 5, MCC forecasts this figure will reach a peak 
value of 1,540 US$. The target refers and will be assessed only with 
respect to irrigation systems which have been rehabilitated and have 
completed one growing season after rehabilitation completion.
    \5\ The target refers and will be assessed only with respect to 
irrigation systems which have been rehabilitated and have completed 
one growing season after rehabilitation completion.
    \6\ After Year 5, MCC forecasts this figure will reach a peak 
value of 420 US$. The target refers and will be assessed only with 
respect to irrigation systems which have been rehabilitated and have 
completed one growing season after rehabilitation completion.
    \7\ After Year 5, MCC forecasts this figure will reach a peak 
value of 13,000 hectares.
    \8\ After Year 5, MCC forecasts this figure will reach a peak 
value of 9,300 hectares.
    \9\ All currency figures are in 2009 values using a market 
conversion rate of 10.52 MDL/US$.
    \10\ Index of perceptions/satisfaction with timeliness, cost, 
and administrative service is measured through a weighted average of 
percentages of users answering ``4'' and ``5'' to questions 20.1.3 
(50 percent), 21.1.1 (25 percent), and 21.4.1 (25 percent) of the 
Moldova transition to high value agriculture Baseline Farm Survey 
completed in 2009.
    \11\ The achievements of these targets are subject to the 
continuation and completion of the Activity after the pilot phase.
    \12\ Based upon a projected cumulative five year loan volume of 
14,900,000 US$, a price per metric ton for cold storage capacity of 
750 US$, a loan-to-investment ratio of 60 percent, and approximately 
50 percent of total loans financed devoted to cold storage. Cold 
storage facility is assumed to be operational within one year of the 
loan issuance.
    \13\ For example, similar individuals who do not access 
financing from the project are expected to find financing equivalent 
to or less than 25 percent of the financing received by project 
beneficiaries.
    \14\ The achievements of these targets are subject to full 
funding of this Activity by MCC (US$4.4 million) and USAID (US$9.0 
million, subject to availability of funds). In the case of partial 
funding of this Activity, the targets will be revised by mutual 
agreement of MCC, USAID, and MCA-Moldova in the M&E Plan.
    \15\ The target represents the minimum International Roughness 
Index of the road segment during the life of the Compact.
---------------------------------------------------------------------------

    (d) Management Information System. The M&E Plan will describe the 
information system that will be used to collect data, store, process 
and deliver information to relevant stakeholders in such a way that the 
Program information collected and verified pursuant to the M&E Plan is 
at all times accessible and useful to those who wish to use it. The 
system development will take into consideration the requirement and 
data needs of the components of the Program, and will be aligned with 
existing MCC systems, other service providers, and ministries.
    (e) Role of MCA-Moldova. The monitoring and evaluation of this 
Compact spans discrete Projects and will involve a variety of 
governmental, non-governmental, and private sector institutions. 
Subject to Section 3.2(b) of the Compact, MCA-Moldova is responsible 
for implementation of the M&E Plan. MCA-Moldova will oversee all 
Compact-related monitoring and evaluation activities conducted for each 
of the Projects, ensuring that data from all implementing entities is 
consistent, accurately reported and aggregated into regular Compact 
performance reports as described in the M&E Plan.

4. Evaluation Component

    The evaluation component of the M&E Plan will contain three types 
of evaluations: (a) Impact evaluations; (b) project performance 
evaluations; and (c) special studies. The evaluation component of the 
M&E Plan will describe the purpose of the evaluation, methodology, 
timeline, required MCC approvals, and the process for collection and 
analysis of data for each evaluation. The results of all evaluations 
will be made publicly available in accordance with MCC's guidelines for 
monitoring and evaluation plans posted from time to time on the MCC Web 
site (the ``MCC Policy for Monitoring and Evaluation of Compacts and 
Threshold Programs'').
    (a) Impact Evaluation. The M&E Plan will include a description of 
the methods to be used for impact evaluations and plans for integrating 
the evaluation method into Project design. Based on in-country 
consultation with stakeholders, the strategies outlined below were 
jointly determined as having the strongest potential for rigorous 
impact evaluation. The M&E Plan will further outline in detail these 
methodologies. Final impact evaluation strategies are to be included in 
the M&E Plan. The following is a summary of the potential impact 
evaluation methodologies:
    (i) Transition to High Value Agriculture Project.
    (1) The Centralized Irrigation System Rehabilitation Activity and 
Irrigation Management Transfer Sub-Activity will be examined in 
conjunction with the MCC sponsored impact evaluation in order to 
measure the combined effect of improved access to water and the 
technical assistance offered under the Growing High Value Agriculture 
Sales Activity as well as the stand alone value of the irrigation 
rehabilitation. Over time, hectares irrigated, hectares producing high 
value agriculture crops, and farm profits in areas where the 
Centralized Irrigation System Rehabilitation Activity and Irrigation 
Management Transfer Activity are implemented should increase 
dramatically compared to areas outside the project area, and the path 
of causation would be clear, therefore methodologies employing 
randomization of access to the Centralized Irrigation System 
Rehabilitation Activity and Irrigation Management Transfer Activity 
will not be a necessary element of the evaluation. This strategy is 
contingent on timely execution of the Centralized Irrigation System 
Rehabilitation Activity that would allow at least one growing season 
after improved irrigation to be observed.
    (2) For the Access to Agricultural Finance Activity, the 
incremental impact that can be attributed to MCC's investments will be 
estimated by comparing outcomes such as total investment and 
profitability between those who received loans through the program and 
a comparison group. A suitable method for creating a comparison group 
is expected to include an element of randomized credit provision. 
Challenges such as the availability of other donor financing and the 
potentially limited scope of post-harvest investment in Moldova may 
dictate amendments to this strategy during the evaluation design phase. 
Since gaps exist in many countries' financial markets where banks rely 
on a high level of collateral and equity markets are under-developed, 
it would be of value for Moldova, MCC, and the donor community to 
understand the benefits and costs of subsidized lending. A mid-term 
review will be part of the evaluation plan, and the activity may be 
terminated or scaled up depending upon the results of this mid-term 
evaluation.
    (3) For the Growing High Value Agriculture Sales Activity, the 
evaluation is expected to determine how the Activity trainings affect 
prices, profit margins, and yields. As it is intended that the Growing 
High Value Agriculture Sales Activity of the Compact would be 
implemented by USAID, close coordination in the evaluation would be 
required. MCC and USAID are currently in the process of defining how 
this coordination would occur and confirming the feasibility of such 
coordination. Randomized selection criteria are expected to be an 
element of the evaluation.
    (ii) Road Rehabilitation Project.
    A rigorous evaluation of the impact of the Road Rehabilitation 
Project is not envisioned due to the lengthy time of construction and 
the natural time required for the economy to adapt to the improvement.
    (b) Final Evaluation. The M&E Plan will make provision for final 
Project level evaluations (``Final Evaluations''). With the prior 
written approval of MCC, MCA-Moldova will engage independent

[[Page 4870]]

evaluators to conduct the Final Evaluations at the end of each Project. 
The Final Evaluations will review progress during Compact 
implementation and provide a qualitative context for interpreting 
monitoring data and impact evaluation findings. They must at a minimum 
(i) evaluate the efficiency and effectiveness of the Project 
Activities, (ii) determine if and analyze the reasons why the Compact 
Goal, Program Objective and Project Objective(s), outcome(s) and 
output(s) were or were not achieved, (iii) identify positive and 
negative unintended results of the Program, (iv) provide lessons 
learned that may be applied to similar projects, and (v) assess the 
likelihood that results will be sustained over time.
    (i) Special Studies. The M&E Plan will include a description of the 
methods to be used for special studies, as necessary, funded through 
this Compact or by MCC. Plans for conducting the special studies will 
be determined jointly between MCA-Moldova and MCC before the approval 
of the M&E Plan. The M&E Plan will identify and make provision for any 
other special studies, ad hoc evaluations, and research that may be 
needed as part of the monitoring and evaluating of this Compact. Either 
MCC or MCA-Moldova may request special studies or ad hoc evaluations of 
Projects, Project Activities, or the Program as a whole prior to the 
expiration of the Compact Term. When MCA-Moldova engages an evaluator, 
the engagement will be subject to the prior written approval of MCC. 
Contract terms must ensure non-biased results and the publication of 
results.
    (c) Request for Ad Hoc Evaluation or Special Study. If MCA-Moldova 
requires an ad hoc independent evaluation or special study at the 
request of the Government for any reason, including for the purpose of 
contesting an MCC determination with respect to a Project or Activity 
or to seek funding from other donors, no MCC Funding or MCA-Moldova 
resources may be applied to such evaluation or special study without 
MCC's prior written approval.

5. Other Components of the M&E Plan

    In addition to the monitoring and evaluation components, the M&E 
Plan will include the following components for the Program, Projects 
and Project Activities, including, where appropriate, roles and 
responsibilities of the relevant parties and providers:
    (a) Costs. A detailed cost estimate for all components of the M&E 
Plan; and
    (b) Assumptions and Risks. Any assumption or risk external to the 
Program that underlies the accomplishment of the Program Objective, 
Project Objectives and Activity outcomes and outputs. However, such 
assumptions and risks will not excuse any Party's performance unless 
otherwise expressly agreed to in writing by the Parties.

6. Implementation of the M&E Plan

    (a) Approval and Implementation. The approval and implementation of 
the M&E Plan, as amended from time to time, will be in accordance with 
the Program Implementation Agreement and any other relevant 
supplemental agreement, and the MCC Policy for Monitoring and 
Evaluation of Compacts and Threshold Programs.

Annex IV Conditions to Disbursement of Compact Implementation Funding

    This Annex IV sets forth the conditions precedent applicable to 
Disbursements of Compact Implementation Funding (each a ``CIF 
Disbursement''). Capitalized terms used in this Annex IV and not 
defined in this Annex IV or in the Compact have the meanings assigned 
to such terms in the Program Implementation Agreement. Upon execution 
of the Program Implementation Agreement, each CIF Disbursement will be 
subject to the terms and conditions of the Program Implementation 
Agreement (including, without limitation, Section 3.3 thereof).

1. Conditions to the Initial CIF Disbursement

    Each of the following conditions precedent must have been met to 
MCC's satisfaction prior to the initial CIF Disbursement:
    (a) Prior to any CIF Disbursement into any Permitted Account in 
accordance with an approved Disbursement Request, MCA-Moldova will have 
delivered to MCC a complete, correct, and fully executed Disbursement 
Request for the relevant Disbursement Period, in form and substance 
satisfactory to MCC and submitted in accordance with the Reporting 
Guidelines. Each Disbursement Request will include the following 
reference number: GR08MDA10010.
    (b)(i) Each Activity being funded by such CIF Disbursement is 
consistent with the goal of facilitating the implementation of the 
Compact (ii) there has been no violation of, and the use of the 
requested funds for the purposes requested will not violate, the 
limitations on the use or treatment of (1) MCC Funding, as set forth in 
this Compact, including under Section 2.7, or (2) Compact 
Implementation Funding; and (iii) no material breach of any covenant, 
obligation, or responsibility of the Government or MCA-Moldova under 
this Compact, the Program Implementation Agreement, any supplemental 
agreement, or any Program Guidelines has occurred or is continuing. 
MCA-Moldova will have delivered to MCC (x) evidence of the adoption and 
publication of the Establishment Decree, and (y) an up-to-date extract 
from the state registry verifying that MCA-Moldova is a fully-formed 
and registered public institution under the laws of Moldova.
    (c) MCA-Moldova will be sufficiently mobilized in order for MCA-
Moldova to be able to fully perform its obligations and to act on 
behalf of the Government.
    (d) MCA-Moldova will have adopted a Procurement Plan, in form and 
substance satisfactory to MCC, with respect to the Compact 
Implementation Funding, and such Procurement Plan remains in full force 
and effect.
    (e) MCA-Moldova will have adopted a Fiscal Accountability Plan, in 
form and substance satisfactory to MCC, and such Fiscal Accountability 
Plan remains in full force and effect.
    (f) The Government will have adopted and published a decree, in 
form and substance satisfactory to MCC, administratively implementing 
the tax exemption mechanism as set forth in the Compact, and such 
decree will remain in full force and effect.
    (g) The Fiscal Agent will have been duly appointed, and MCA-Moldova 
will have duly executed the Fiscal Agent Agreement, and such agreement 
will be in full force and effect without modification, alteration, 
rescission, or suspension of any kind, unless otherwise agreed by MCC, 
and no material breach has occurred or is continuing thereunder.
    (h) The Procurement Agent will have been duly appointed, and MCA-
Moldova will have duly executed an agreement with the Procurement 
Agent, and such agreement will be in full force and effect without 
modification, alteration, rescission, or suspension of any kind, unless 
otherwise agreed by MCC, and no material breach has occurred or is 
continuing thereunder.
    (i) The Bank will have been duly appointed, and MCA-Moldova and the 
Fiscal Agent will have duly executed the Bank Agreement, and such 
agreement will be in full force and effect without modification, 
alteration, rescission, or suspension of any kind, unless otherwise 
agreed by MCC, and no material breach has occurred or is continuing 
thereunder.
    (j) The Permitted Account will be established.

[[Page 4871]]

2. Conditions to Each CIF Disbursement Thereafter

    Each of the following conditions precedent must have been met to 
MCC's satisfaction prior to the applicable CIF Disbursement:
    (a) Prior to any CIF Disbursement into any Permitted Account in 
accordance with an approved Disbursement Request, MCA-Moldova will have 
delivered to MCC a complete, correct, and fully executed Disbursement 
Request for the relevant Disbursement Period, together with any 
applicable Periodic Reports covering such Disbursement Period, in each 
case in form and substance satisfactory to MCC and submitted in 
accordance with the Reporting Guidelines. Each Disbursement Request 
will include the following reference number: GR08MDA10010.
    (b) (i) Each Activity being funded by such CIF Disbursement is 
consistent with the goal of facilitating the implementation of the 
Compact; (ii) there has been no violation of, and the use of the 
requested funds for the purposes requested will not violate, the 
limitations on the use or treatment of (1) MCC Funding, as set forth in 
this Compact, including under Section 2.7, or (2) Compact 
Implementation Funding; (iii) no material breach of any covenant, 
obligation, or responsibility of the Government or MCA-Moldova under 
this Compact, the Program Implementation Agreement, any supplemental 
agreement, or any Program Guidelines has occurred or is continuing; and 
(iv) any Taxes paid with MCC Funding through the date ninety (90) days 
prior to the start of the applicable Disbursement Period have been 
reimbursed by the Government in full in accordance with this Compact.
    (c) The MCA-Moldova Procurement Plan will be in full force and 
effect.
    (d) The MCA-Moldova Fiscal Accountability Plan will be in full 
force and effect.
    (e) Each of the Fiscal Agent Agreement, the MCA-Moldova agreement 
with the Procurement Agent, and the Bank Agreement will be in full 
force and effect without modification, alteration, rescission, or 
suspension of any kind, unless otherwise agreed by MCC, and no material 
breach has occurred or is continuing thereunder.
    (f) The Permitted Account will be in effect.
    (g) The decree administratively implementing the tax exemption 
mechanism set forth in the Compact will be in full force and effect.

Annex V Definitions

    Access to Agricultural Finance Activity has the meaning provided in 
paragraph 1(a) of Part B of Annex I.
    Activity has the meaning provided in Part B of Annex I.
    Additional Representative has the meaning provided in Section 4.2.
    Audit Guidelines has the meaning provided in Section 3.8(a).
    Baseline has the meaning provided in paragraph 3 of Annex III.
    Centralized Irrigation System Rehabilitation Activity has the 
meaning provided in paragraph 1(a) of Part B of Annex I.
    CIF Disbursement has the meaning provided in Annex IV.
    CLD has the meaning provided in paragraph 1(a)(iii)(1) of Part B of 
Annex I.
    Compact has the meaning provided in the Preamble.
    Compact Goal has the meaning provided in Section 1.1.
    Compact Implementation Funding has the meaning provided in Section 
2.2(a).
    Compact Records has the meaning provided in Section 3.7(a).
    Compact Term has the meaning provided in Section 7.4.
    Construction Vendor has the meaning provided in Schedule E of Annex 
VI.
    Consultative Group has the meaning provided in paragraph 
3(c)(ii)(1) of Part B of Annex I.
    Covered Provider has the meaning provided in Section 3.7(c).
    Customs Code has the meaning provided in Schedule F of Annex VI.
    Customs Tariff Law has the meaning provided in Schedule B of Annex 
VI.
    Disbursement has the meaning provided in Section 2.4.
    Establishment Decree has the meaning provided in Section 3.2(b).
    Evaluation Component has the meaning provided in paragraph 1 of 
Annex III.
    Excess CIF Amount has the meaning provided in Section 2.2(d).
    Exempt Employers has the meaning provided in Schedule D of Annex 
VI.
    Exempt Individual has the meaning provided in Schedule D of Annex 
VI.
    Exempt Personal Income has the meaning provided in Schedule D of 
Annex VI.
    Exempt Vendor has the meaning provided in Schedule C of Annex VI.
    Final Evaluations has the meaning provided in paragraph 4(b) of 
Annex III.
    Fiscal Agent has the meaning provided in paragraph 3(e) of Part B 
of Annex I.
    Governance Guidelines has the meaning provided in paragraph 3(c) of 
Part B of Annex I.
    Government has the meaning provided in the Preamble.
    Government Decision No. 1140 has the meaning provided in Schedule F 
of Annex VI.
    Growing High Value Agriculture Sales Activity has the meaning 
provided in paragraph 1(a) of Part B of Annex I.
    High Value Agriculture Post-Harvest Credit Facility has the meaning 
provided in paragraph 1(a)(iii) of Part B of Annex I.
    Implementation Letter has the meaning provided in Section 3.5.
    Implementing Entity has the meaning provided paragraph 3(d) of Part 
B of Annex I.
    Implementing Entity Agreement has the meaning provided in paragraph 
3(d) of Part B of Annex I.
    Indicators has the meaning provided in paragraph 3(a) of Annex III.
    Inspector General has the meaning provided in Section 3.8(a).
    Investment Development Services has the meaning provided in 
paragraph of 1(a)(iii) of Part B of Annex I.
    Irrigation Management Transfer Sub-Activity has the meaning 
provided in paragraph 1(a)(ii) of Part B of Annex I.
    Irrigation Sector Reform Activity has the meaning provided in 
paragraph 1(a) of Part B of Annex I.
    Joint Group has the meaning provided in paragraph 2(a) of Part B of 
Annex I.
    M2 has the meaning provided in paragraph 2(a) of Part B of Annex I.
    M2 Road Activity has the meaning provided in paragraph 2(a)(i) of 
Part B of Annex I.
    M&E Annex has the meaning provided in Annex III.
    M&E Plan has the meaning provided in Annex III.
    Management Unit has the meaning provided in paragraph 3(c)(iii)(1) 
of Part B of Annex I.
    MCA Act has the meaning provided in Section 2.2(a).
    MCA-Moldova has the meaning provided in Section 3.2(b).
    MCA-Moldova Bylaws has the meaning provided in paragraph 3(c) of 
Part B of Annex I.
    MCC has the meaning provided in the Preamble.
    MCC Environmental Guidelines has the meaning provided in Section 
2.7(c).
    MCC Funding has the meaning provided in Section 2.3.
    MCC Gender Policy has the meaning provided in paragraph 3 of Part A 
of Annex I.
    MCC Policy for Monitoring and Evaluation of Compacts and Threshold 
Programs has the meaning provided for in paragraph 4 of Annex III.
    MCC Program Procurement Guidelines has the meaning provided in 
Section 3.6.

[[Page 4872]]

    MCC Web site has the meaning provided in Section 2.7.
    Moldova has the meaning provided in the Preamble.
    Monitoring Component has the meaning provided in paragraph 1 of 
Annex III.
    MTAs has the meaning provided in paragraph 1(a)(ii)(1) of Part B of 
Annex I.
    Multi-Year Financial Plan has the meaning provided in paragraph 1 
of Annex II.
    Multi-Year Financial Plan Summary has the meaning provided in 
paragraph 1 of Annex II.
    OMB has the meaning provided in Section 3.8(b).
    OP 4.12 has the meaning provided in paragraph 3 of Part A of Annex 
I.
    Other Taxes has the meaning provided in Schedule I of Annex VI.
    Party and Parties has the meaning provided in the Preamble.
    Permitted Account has the meaning provided in Section 2.4.
    Personal Income Taxes has the meaning provided in Schedule D of 
Annex VI.
    PFIs has the meaning provided in paragraph 1(a)(iii)(1) of Part B 
of Annex I.
    PPP has the meaning provided in paragraph 2(b) of Part B of Annex 
I.
    Principal Representative has the meaning provided in Section 4.2.
    Procurement Agent has the meaning provided in paragraph 3(f) of 
Part B of Annex I.
    Program has the meaning provided in the Preamble.
    Program Assets include MCC Funding, interest accrued thereon, and 
any assets, goods or property (real, tangible or intangible) purchased 
or financed in whole or in part (directly or indirectly) by MCC 
Funding.
    Program Funding has the meaning provided in Section 2.1.
    Program Guidelines means collectively the Audit Guidelines, the MCC 
Environmental Guidelines, the Governance Guidelines, the MCC Program 
Procurement Guidelines, the Reporting Guidelines, the MCC Policy for 
Monitoring and Evaluation of Compacts and Threshold Programs, and any 
other guidelines, policies or guidance papers from time to time 
published on the MCC Web site.
    Program Implementation Agreement or PIA has the meaning provided in 
Section 3.1.
    Program Objective has the meaning provided in Section 1.2.
    Project(s) has the meaning provided in Section 6.2(b).
    Project Objective(s) has the meaning provided in Section 1.3.
    Provider has the meaning provided in Section 3.7(c).
    Reporting Guidelines means the MCC ``Guidance on Quarterly MCA 
Disbursement Request and Reporting Package'' posted by MCC on the MCC 
Web site or otherwise publicly made available.
    River Basin Management Sub-Activity has the meaning provided in 
paragraph 1(a)(ii) of Part B of Annex I.
    Road Rehabilitation Project has the meaning provided in paragraph 
2(a) in Part B of Annex I.
    State Fiscal Inspectorate has the meaning provided in Schedule E of 
Annex VI.
    Steering Committee has the meaning provided in paragraph 3(c)(i)(1) 
of Part B of Annex I.
    Target has the meaning provided in paragraph 3(a) of Annex III.
    Target Areas has the meaning provided in Table 1 of Annex III.
    Tax Agent has the meaning provided in Schedule I of Annex VI.
    Tax Code has the meaning provided in Schedule A of Annex VI.
    Taxes has the meaning provided in Section 2.8(a).
    Transition to High Value Agriculture Project has the meaning 
provided in paragraph 1(a) of Part B of Annex I.
    United States Dollars or US$ means the lawful currency of the 
United States of America.
    USAID has the meaning provided in paragraph 1(a) of Part B of Annex 
I.
    VAT has the meaning provided in Section 2.8(b).
    Vendor has the meaning provided in Schedule A of Annex VI.
    Water Law has the meaning provided in paragraph 1(a)(ii) of Part B 
of Annex I.
    WUA has the meaning provided in paragraph 1(a) of Part B of Annex 
I.
    WUA Law has the meaning provided in paragraph 1(a)(ii) of Part B of 
Annex I.

Annex VI Specific Tax Exemption Mechanisms

Schedule A Value Added Tax (VAT)

Legal Basis for Exemption

    1. The Compact.
    2. Article 4, clause (1) of the Tax Code of Moldova (``Tax Code'') 
(Law 1163-XIII, dated April 24, 1997).

Beneficiaries of Exemption

    1. MCA-Moldova.
    2. Each Implementing Entity, and any vendor procuring services, 
goods or works in furtherance of the Compact (each a ``Vendor'').

Procedures

    The beneficiaries of the exemption will procure services, goods and 
works exempted from VAT, except the procurement of petroleum products, 
which is addressed in Schedule E.

Purchase of Goods (Except Imported Goods), Services and Works

    In order for the beneficiaries of the exemption to obtain the VAT 
exemption from suppliers of the goods (except imported goods), services 
and works supplied in Moldova, the MCA-Moldova must provide the 
beneficiary of the exemption with an official letter from MCA-Moldova, 
issued on official letterhead, which will confirm that such goods, 
services or works are exempted from VAT, and which will contain the 
name of the project and the name of the beneficiary of the exemption.
    This letter will be attached to the applicable provider's invoice 
or waybill (``factura''). The factura will serve as strict evidence of 
delivery of the goods, provision of services or rendering of works. The 
``factura'' will be countersigned by an authorized representative of 
the beneficiary of the exemption. An original of the factura will be 
kept by the applicable provider and will be provided in case of 
inspection by fiscal authorities to show the reason for exemption from 
VAT.

Imported Goods

    For the importation of goods into Moldova, the exemption from VAT 
will be applicable while clearing the goods for customs. To receive the 
exemption from VAT, the beneficiary of the exemption will file a 
request to the customs office supported by:
     A letter from MCA-Moldova, issued on official letterhead, 
which will confirm that the goods are imported exclusively for the 
furtherance of the Compact, the name of the project and the name of the 
beneficiary of the exemption;
     Invoice for the goods;
     Copy of the purchase order or contract for the delivery of 
the applicable goods to be used in furtherance of the Projects;
     Transportation documents (CMR, TIR carnet, Airway bill, 
etc.); and
     Certificates, authorizations, licenses, if required by 
Moldovan laws and regulations for the importation of the goods.
    Clearance will be granted by the customs offices with the exemption 
from VAT based on the submission of the above-mentioned documents

[[Page 4873]]

Schedule B Customs Duties

Legal Basis for Exemption

    1. The Compact.
    2. Article 28, clause (n), and Article 31 and Note 1 of Annex 2 of 
the Law on the Customs Tariff (the ``Customs Tariff Law'') (No. 1380-
XIII, dated November 20, 1997).

Beneficiaries of Exemption

    MCA-Moldova, each Implementing Entity, and any Vendor importing 
goods for the furtherance of the Compact.

Procedures

    Clearance of the imported goods without customs duties will be 
performed by the customs offices.
    In order to obtain clearance for imported goods, the beneficiary of 
the exemption will submit a request for such goods to be exempted from 
customs duties, supported by:
     A letter from MCA-Moldova, issued on official letterhead, 
which will confirm that the goods are imported for the exclusive use of 
the Compact, and which will contain the name of the project and the 
name of the beneficiary of the exemption;
     The invoice for the goods;
     A copy of the purchase order or contract for the goods;
     Transportation documents (CMR, TIR carnet, Airway bill, 
etc.); and
     Certificates, authorizations, licenses, if required for 
the importation of goods.

Schedule C Corporate Income Tax

Legal Basis for Exemption

    1. The Compact.
    2. Article 4, clause (1) of the Tax Code.

Beneficiaries of Exemption

    1. MCA-Moldova.
    2. Each Implementing Entity and any Vendor working in furtherance 
of the Compact (each an ``Exempt Vendor''), other than Vendors that are 
nationals of Moldova.

Procedures

     MCA-Moldova and all Exempt Vendors will be entitled to an 
exemption from Moldovan tax on income earned from supplying goods, 
works or services in furtherance of the Compact.
     MCA-Moldova will not be required to withhold tax from 
payments made to an Exempt Vendor.
     The Exempt Vendor will not file any tax returns in Moldova 
for income earned from supplies of goods, works and services in 
furtherance of the Compact. In the event that an Exempt Vendor will 
earn taxable income from Moldovan sources other than from Compact-
related activities, then such income will be recorded and accounted for 
by the Exempt Vendor separately from the income from Compact-related 
activities and will be outside the scope of the tax exemptions provided 
under this Compact.

Schedule D Individual Income Tax

Legal Basis for Exemption

    1. The Compact.
    2. Article 4, clause (1) of the Tax Code.

Beneficiaries of Exemption

    All natural persons working in furtherance of the Compact (each 
``Exempt Individual''), other than nationals of Moldova. Non-Moldovan 
nationals working in furtherance of the Compact who, after passage of 
time, become Moldovan ``tax residents'' for the purposes of Moldovan 
tax law will also be deemed Exempt Individuals.

Procedures

     The Exempt Individuals will be exempt from any income, 
social security, medical insurance or other mandatory taxes and charges 
imposed by Moldova or any subdivision thereof, regarding personal 
income (the ``Personal Income Taxes'') received in connection with 
income earned from works and services performed in furtherance of the 
Compact (the ``Exempt Personal Income'').
     MCA-Moldova, the Implementing Entities, the Fiscal Agent 
and the Procurement Agent and any other Vendor who employs Exempt 
Individuals (the ``Exempt Employers'') will not withhold or pay 
Personal Income Taxes for the Exempt Individuals.
     The Exempt Individual will have no obligation to file an 
income tax return in Moldova in relation to Exempt Personal Income.
     The Exempt Employers will have no obligation under 
Moldovan law in connection with the completion of any mandatory 
filings, registrations and periodic reporting in relation to the Exempt 
Personal Income of the Exempt Individuals.

Schedule E Taxation of Petroleum Products

Legal Basis for Exemption

    1. The Compact.
    2. Article 4, clause (1) of the Tax Code.

Beneficiaries of Exemption

    Vendors providing construction services to MCA-Moldova or another 
Vendor making large-scale procurements of petroleum products for use in 
connection with such construction projects (a ``Construction Vendor'').

Procedures

    A Construction Vendor procuring and/or importing petroleum products 
to be used for the Compact Program will pay the VAT and excise duties 
at the point of purchase and request a refund of these taxes.
    In order to receive such refund, a Construction Vendor should 
submit to State Fiscal Inspectorate under the Ministry of Finance of 
Moldova (the ``State Fiscal Inspectorate'') the following documents:
     An official letter from MCA-Moldova, issued on official 
letterhead, which will confirm the quantity/volume of petroleum 
products specified in such Construction Vendor's bid for a program 
contract, and which will contain the name of the construction project 
and the name of the beneficiary of the exemption;
     An official request issued by the Construction Vendor 
requesting that the State Fiscal Inspectorate refund VAT and excise-
duty paid, certifying (i) the maximum quantity/volume of petroleum 
products specified in the beneficiary of the exemption's bid proposal 
for a Program contract (which amount will be the maximum allowable 
quantity subject to reimbursement), (ii) the quantity of petroleum 
products subject to reimbursement in the pending request, (iii) the 
quantity of petroleum products for which VAT and excise duties have 
been previously reimbursed to the beneficiary of the exemption under 
such contract, and (iv) that the petroleum products in the present 
request were used in connection with the named construction project; 
and
     The original fiscal invoice received from the supplier of 
the petroleum products, while procuring them in the territory of 
Moldova and/or customs declaration issued in the name of the 
Construction Vendor, while importing the petroleum products into 
Moldova.
    The above-mentioned documents will be submitted to State Fiscal 
Inspectorate on a monthly basis for the petroleum purchases made during 
the previous calendar month.
    The amount of VAT and excise-duties subject to refund should be 
determined by the Construction Vendors and confirmed by the State 
Fiscal Inspectorate based on the amounts the VAT and excise-duties paid 
at the moment of procuring of the petroleum products and indicated in 
the fiscal invoice(s) and/or customs declaration(s)

[[Page 4874]]

and according to the excise duty rates then applicable.
    The amount of the VAT and excise-duties should be transfered to the 
bank account(s) of the Vendors opened in the banks, who have fiscal 
relations with budgetary system of Moldova. The decision on refund of 
these taxes will be taken by the State Fiscal Inspectorate within 45 
days after receiving by the State Fiscal Inspectorate of the request.

Schedule F Temporary Admission of Equipment, Vehicles, and Household 
Goods

Legal Basis for Exemption

    1. The Compact.
    2. Articles 7 and 68 of the Customs Code of Moldova (the ``Customs 
Code'') (Law No. 1149-XIV, dated July 20, 2000).
    3. Article 4, clause (1), Article 103, clause (2), sub-clause (c) 
of the Tax Code.
    4. Article 28, clause (f) of the Customs Tariff Law (Law No. 1380-
XIII, dated November 20, 1997).
    5. Article 5, clause (3) and Article 7 of the Law on the Manner of 
Introduction into the Territory of the Republic of Moldova and Re-
export of Goods by Individuals (Law No. 1569-XV dated December 20, 
2002).
    6. Chapter 7, Annex 1 of the Governmental Decision approving the 
regulation on implementation of the customs procedures, established by 
the Customs Code, No. 1140 (``Government Decision No. 1140'') dated 
November 2, 2005.

Beneficiaries of Exemption

    MCA-Moldova, any Implementing Entity, and any Vendor importing 
goods on a temporary basis to be used exclusively in furtherance of the 
Compact; as well as any Exempt Individual importing equipment, 
vehicles, and household goods for personal use.

Procedures

    The temporary admission of equipment, vehicles, and household goods 
is granted by the customs office, without payment of VAT, customs 
duties, excise duties, customs procedure taxes, or any other Taxes, 
based on the request submitted by the beneficiary of the exemption. The 
request should provide the reasons for the temporary admission of the 
items in accordance with Government Decision No. 1140 and be supported 
by:
     A letter from MCA-Moldova, issued on official letterhead, 
which will confirm that the goods are temporarily imported for the 
exclusive use of the Compact or for the personal use of the Exempt 
Individual, and which will contain the name of the project and the name 
of the beneficiary of the exemption;
     An invoice for the goods, if applicable;
     A copy of the contract supporting the temporary admission 
of the goods, if applicable;
     Transportation documents (CMR, TIR carnet, Airway bill, 
etc.), if applicable; and
     Certificates, authorizations, licenses, if required for 
the importation of goods.
    Authorization for temporary admission, with the above-mentioned 
exemptions, will be granted by the customs offices based on the 
submission of the above-mentioned documents.
    Upon receipt of customs authorization, the beneficiary of the 
exemption will cause the customs declaration to be prepared for 
submission to the customs office, whereupon the customs office will 
clear the goods without payment of VAT, customs duties, excise duties, 
customs procedure taxes, or any other Taxes.
    If the imported goods are owned by the beneficiary of the 
exemption, the above-mentioned invoices and contracts will not be 
required.

Schedule G Excise Duty

Legal Basis for Exemption

    1. The Compact.
    2. Article 4, clause (1), Article 124, clause (2), sub-clause (b) 
and Article 124, clause (3) of the Tax Code.

Beneficiaries of Exemption

    MCA-Moldova, any Implementing Entity, and any Vendors.

Procedures

    The exemption is applicable only when importing goods in 
furtherance of the implementation of the Compact, which are subject to 
excise duties, except the procurement of petroleum products, which is 
addressed in Schedule E. The exemption is granted together with the 
exemptions from VAT and customs duties. In order to get the goods 
cleared, the beneficiary of the exemption will submit a request for 
exemption, supported by:
     A letter from MCA-Moldova, issued on official letterhead, 
which will confirm that the goods are imported for the exclusive use of 
the Compact, and which will contain the name of the project and the 
name of the beneficiary of the exemption;
     The invoice for the goods;
     A copy of the purchase order or contract for the goods;
     Transportation documents (CMR, TIR carnet, Airway bill, 
etc.); and
     Certificates, authorizations, licenses, if required for 
the importation of goods.
    Clearance will be granted by the customs offices with the exemption 
of the excise duties based on the submission of the above-mentioned 
documents.

Schedule H Customs Procedure Tax

Legal Basis for Exemption

    1. The Compact.
    2. Article 7 of the Customs Code (Law No. 1149-XIV dated July 20, 
2000).
    3. Annex 2 of the Customs Tariff Law (No. 1380-XIII, dated November 
20, 1997).

Beneficiaries of Exemption

    MCA-Moldova, each Implementing Entity, any Vendor importing goods 
for use in furtherance of the Compact, as well as any Exempt Individual 
importing goods for personal use.

Procedures

    Clearance of the imported goods without customs procedure tax will 
be done by the customs offices. In order to obtain clearance for 
imported goods, the beneficiaries of the exemption will submit a 
request for such goods to be exempted from customs procedure taxes, 
supported by:
     A letter from MCA-Moldova, issued on official letterhead, 
which will confirm that the goods are imported for the exclusive use of 
the Compact, and which will contain the name of the project and the 
name of the beneficiary of the exemption;
     The invoice for the goods;
     A copy of the purchase order or contract for the goods;
     Transportation documents (CMR, TIR carnet, Airway bill, 
etc.), if applicable; and
     Certificates, authorizations, licenses, if required for 
the importation of goods.
    If the imported goods are owned by the beneficiary of the 
exemption, the above-mentioned invoices and contracts will not be 
required.
    Clearance will be granted by the customs offices with the exemption 
from the customs procedures tax based on the submission of the above-
mentioned documents.

Schedule I Other Taxes

Legal Basis for Exemption

    1. The Compact.
    2. Article 4, clause (1) of the Tax Code.

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Beneficiaries of Exemption

    Any of MCA-Moldova, the Implementing Entities, and Vendors; as well 
as any Exempt Individual, importing or acquiring property or otherwise 
performing an act or action within the scope of the Compact that 
triggers payment of any tax included in the Tax Code, other than those 
addressed in Schedules A through Schedule H above (the ``Other 
Taxes'').

Procedures

     Whereas the Other Taxes may be chargeable not only by the 
tax offices, but also by third parties as agents of the tax offices 
(the ``Tax Agent''), any beneficiary of exemption will require an 
official letter from MCA-Moldova for the purposes of filing it with the 
tax office or the Tax Agent in order to justify the claimed exemption 
of the relevant Other Tax.
     The official letter from MCA-Moldova is issued on official 
letterhead, which will confirm that the event that triggers payment of 
any Other Tax is within the scope of the Compact, and which contains 
the name of the project and the name of the beneficiary of the 
exemption.
     The Government will ensure that the Government actions 
implementing the exemptions covered by the Compact will address the 
procedures applicable to Other Taxes.

[FR Doc. 2010-1944 Filed 1-28-10; 8:45 am]
BILLING CODE 9211-03-P