[Federal Register Volume 76, Number 229 (Tuesday, November 29, 2011)]
[Notices]
[Pages 73691-73719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-30706]


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MILLENNIUM CHALLENGE CORPORATION

[MCC FR 11-12]


Notice of Entering Into a Compact With the Republic of Indonesia

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 Indonesia. Representatives of the United States Government 
and the Republic of Indonesia executed the Compact documents on 
November 19, 2011.

    Dated: November 23, 2011.
Melvin F. Williams, Jr.,
VP/General Counsel and Corporate Secretary, Millennium Challenge 
Corporation.

Summary of Millennium Challenge Compact With the Republic of Indonesia

    The five-year, $600 million compact with the Government of 
Indonesia (the ``GOI'') is aimed at reducing poverty through economic 
growth (the ``Compact''). To this end, the Compact's three projects are 
intended to increase incomes of households in project areas through 
increased productivity of labor and enterprises, reduced household 
energy costs, and improved provision of growth-enhancing goods and 
services by the public sector.

1. Project Overview and Activity Descriptions

    To advance the Compact goal of reducing poverty through economic 
growth, the Compact will fund three projects. The Green Prosperity 
Project aims to (i) increase productivity and reduce reliance on fossil 
fuels by expanding renewable energy; and (ii) increase productivity by 
improving land use practices and management of natural resources. These 
objectives are consistent with GOI development plans to support low 
carbon economic development and the protection of natural capital 
leading to increased household incomes in project areas. The Community-
Based Health and Nutrition to Reduce Stunting Project aims to reduce 
and prevent low birth weight, childhood stunting, and

[[Page 73692]]

malnourishment of children in project areas, and thereby increase 
household incomes through cost savings, increases in productivity, and 
higher lifetime earnings. Finally, the Procurement Modernization 
Project aims to (i) achieve significant government expenditure savings 
on procured goods and services; and (ii) improve the delivery of public 
services through expenditure of planned budgets.
Green Prosperity (GP) Project
    The majority of Indonesia's poor live in rural areas that are rich 
in natural resources, but the over-extraction and inadequate management 
of these resources threaten Indonesia's ability to sustain high rates 
of economic growth and reduce poverty. It is estimated that over 10,000 
villages in Indonesia (13 percent) do not have access to reliable and 
affordable electricity, and many more rely on expensive and dirty 
diesel generation. Illegal logging, conversion of marginal lands for 
agriculture, water pollution, and other unsustainable land use 
practices are adversely affecting the natural assets that people rely 
on for their livelihoods and wellbeing. The lack of clear data on land 
resource use and jurisdictional boundaries between villages and 
districts significantly hinders GOI agencies and land use planners from 
managing critical natural resources effectively. Ultimately, protecting 
Indonesia's natural resource base in the face of demographic, social, 
and economic forces requires sustainable and equitable economic 
alternatives.
    Indonesia is among the world's top emitters of greenhouse gases. 
The majority of these greenhouse gas emissions result from 
deforestation and land use conversion; however, emissions from energy 
and industrial sources are growing rapidly. The GOI is committed to a 
more sustainable future, having set a target of reducing greenhouse gas 
emissions by 26 percent by 2020, while maintaining a target of seven 
percent annual economic growth. Increasing access to clean and reliable 
energy in rural areas and improving the stewardship of natural assets 
are critical priorities to achieving this goal.
    The GP Project will promote high levels of environmentally 
sustainable, growth as set forth in the GOI's medium to long-term 
development plans. The project will provide a combination of technical 
and financial assistance to support rural economic development that 
raises household incomes of Indonesians in a manner that reduces 
reliance on fossil fuels, improves land management practices, protects 
natural capital, and complements efforts to reduce emissions from 
deforestation and environmental degradation. The GP Project will 
involve local communities and governments in activities to improve the 
clarity and implementation of government policies and regulations.
    The centerpiece of the GP Project is a funding facility that will 
support investments in two areas: (i) Expansion of renewable energy; 
and (ii) sustainable management and use of natural resources (the ``GP 
Facility''). These investments will enhance economic growth, reduce 
Indonesia's carbon footprint, and help align incentives and practices 
to foster improved environmental stewardship at the local level.
    MCC and the GOI will start the GP Project in the provinces of Jambi 
and West Sulawesi. Based on program experience in the two start-up 
provinces, other eligible provinces will be added by mutual agreement. 
Districts will be selected based on a range of geographic, economic, 
environmental, and social indicators, including poverty levels, 
renewable energy potential, economic growth potential, governance, 
forest cover, and peat lands under threat of degradation or 
destruction. Districts must have government-approved spatial plans in 
place and agree to make land use information and licensing processes 
transparent and accessible.
    Key implementing partners and project sponsors are expected to 
include local governments and institutions; private enterprises in the 
agriculture, forestry, water and energy sectors; financial 
institutions; small-holder farmers; and local and international civil 
society organizations. GP Project activities include:
     Participatory Land Use Planning Activity: The purpose of 
this activity is to ensure that projects funded by the GP Facility are 
designed on the basis of accurate spatial and land use data, and adhere 
to and reinforce existing national laws, regulations, and plans. This 
activity also will help strengthen the capacity of local communities 
and district level institutions to manage their own land and resources. 
MCC funding will support: (i) Administrative boundary setting; and (ii) 
updating and integrating inventories of land and other natural resource 
use licenses and other relevant data.
     Technical Assistance and Oversight Activity: Technical 
assistance will be provided to district governments, project sponsors, 
community groups, and financial institutions to assist with the 
preparation of low carbon development work plans, project 
identification and design, preparation of business plans and funding 
applications, and capacity building, where necessary. The purpose of 
this activity is to develop a pipeline of projects for the GP Facility, 
while facilitating significant stakeholder consultations at the local 
level.
     GP Facility Activity: The GP Facility will finance 
projects in the renewable energy and natural resources management 
sectors. One or more independent facility managers acceptable to MCC 
will implement the GP Facility.
    The GP Facility will contain at least two funding windows: (i) A 
window to finance commercial scale renewable energy investments 
reflecting the priority of the GP Project and private sector 
investments in natural resource management; and (ii) a grants window to 
support community-based, small scale renewable energy and other 
projects to promote sustainable natural resource management and improve 
land use practices.
    The GOI will develop a comprehensive operations manual(s), subject 
to MCC approval, that governs operations of the GP Facility. The 
operations manual(s) will include detailed investment criteria and 
outline monitoring and reporting procedures to ensure that investment 
objectives are being achieved, and to verify compliance with other 
relevant criteria, including environmental and social safeguard 
requirements.
    Proposals will be reviewed and recommended for approval in 
accordance with the operations manual. The operations manual will 
contain minimum project eligibility criteria reflecting: (i) A minimum 
economic rate of return (``ERR'') as defined by the MCC hurdle rate; 
(ii) a core objective of improving environmental stewardship; (iii) 
contribution (directly or indirectly) to the reduction of greenhouse 
gas emissions; (iv) equal access for women and other vulnerable groups 
to the project or its benefits; and (v) for commercially viable 
projects, suitable risk allocations to the parties.
     Green Knowledge Activity: The objective of this activity 
is to build local, provincial, and national capacity to advance 
Indonesia's low carbon development strategy nationwide within the 
context of the GP Project. Specifically, MCC funding will support:
    [cir] Capacity building for local and provincial stakeholders to 
stimulate a shift toward low carbon development policies in local and 
provincial governments, and to support the sustainability of MCC's 
investment in the GP Project; and
    [cir] Development and improvement of centers of excellence at 
selected

[[Page 73693]]

Indonesian universities in science and technology related to low carbon 
development with an emphasis on renewable energy and closely related 
areas of natural resource management.
Community-Based Health and Nutrition to Reduce Stunting Project
    Currently, 35.6 percent of children under 2 years old in Indonesia 
are severely stunted, as measured by international standards.\1\ The 
consequences of the cumulative nutritional deprivation in a child's 
early life include higher infant and child mortality, increased 
susceptibility to infection and illness, reduced adult physical 
stature, and impaired cognitive abilities, all of which result in long-
term economic loss.
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    \1\ Low height for age (as measured by two standard deviations 
below height for age).
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    The purpose of the Community-Based Health and Nutrition to Reduce 
Stunting Project is to reduce stunting and low birth weight in infants 
and children 0-2 years old in selected provinces. The project proposes 
an incentives-based scheme that facilitates community demand for tools 
to reduce stunting and improves the supply response and capacities of 
the Ministry of Health at the district and subdistrict levels.
    This project builds on existing community engagement mechanisms 
already tested under a Ministry of Home Affairs community-driven 
development program pilot, Generasi, implemented with assistance from 
the national community empowerment program support trust fund (PSF) 
managed by the World Bank. Generasi successfully supported community 
efforts to improve targeted health, nutrition, and education 
indicators. With MCC support, the GOI will revise the program to obtain 
stronger nutrition and stunting outcomes. The ``Generasi Plus'' 
approach reinforces the community incentives system originally piloted 
under the Generasi program, and adds provider incentives to ensure that 
the supply of health services will meet communities' demand. Project 
activities include:
     Community Projects Activity: MCC funding will be used by 
the PSF to finance block grants, participatory planning, and technical 
assistance to communities. To receive funding, villages participating 
in Generasi commit to improving 12 basic health and education 
indicators. Under Generasi Plus, stunting indicators (including a 
measure of children's height for age) will be added to the existing 12 
indicators. Facilitators, trained specifically in nutrition and 
stunting interventions, will work with local health and sanitation 
service providers to assist villagers in a participatory planning 
process to help identify problems and find local solutions to be funded 
using the block grant. In order to focus communities on the most 
beneficial interventions, the GOI will base the size of the villages' 
Generasi Plus block grant for the subsequent year partly on their 
performance on each of the targeted health and education indicators.
     Supply-Side Interventions Activity: MCC funding will be 
used by the PSF (or other mechanism acceptable to MCC) to support: (i) 
the creation of an enhanced training program for all health and 
sanitation service providers in the designated project areas to 
encourage a focus on stunting reduction and related interventions; and 
(ii) testing various types of incentives to service providers based on 
their service delivery performance. MCC funding will also be used for 
grants to stimulate market-based responses to identified demand for 
nutrition and sanitation interventions.
     Communications, Project Management, and Evaluation 
Activity: MCC funding will be used by the PSF to support development 
and implementation of a national stunting awareness campaign with a 
focus on healthy families that emphasizes shared decision making 
between women and men within the household.
Procurement Modernization Project
    Efficient and effective public procurement is a strategic public 
sector function and a fundamental component of good governance. 
Indonesia's existing public procurement systems are highly vulnerable 
to fraud, waste, and abuse resulting in significant loss of funds and 
diminished quality of services, with some studies estimating that the 
equivalent of over $15 billion could be lost to corrupt and inept 
procurement practices in 2011 alone. Indonesia has issued two 
presidential regulations to modernize its public procurement system. 
These presidential regulations require the formation of Procurement 
Service Units (PSUs) at the national and local levels to serve as 
permanent, independent units where procurement professionals will 
provide a centralized procurement service. While approximately 150 PSUs 
have been established, most do not meet the requirements of a 
modernized procurement function and questions remain about how to 
organize and define the roles and responsibilities of the PSUs in local 
and national government. The National Public Procurement Policy Agency 
(LKPP) is eager to implement these modernization efforts and to promote 
international best practices in public procurement. Project activities 
include:
     Procurement Professionalization Activity: The next steps 
in the procurement reform agenda for Indonesia are to: (i) Build a 
professional procurement workforce; (ii) create an institutionalized 
role and structure that provides sufficient authority to implement good 
practice; and (iii) provide a career path to incentivize adherence to 
best practices, while strengthening controls such as procurement and 
financial audits, which are needed to ensure improved institutional 
performance. To this end, the Procurement Modernization Project will 
implement the following mutually reinforcing subactivities:
    [cir] Institutional Structure and Professionalization of PSUs to 
support PSUs at the various levels of government by: (i) determining 
standard staffing needs and strengthening operational modalities of 
PSUs; (ii) supporting LKPP's human resource development strategy by 
establishing a curriculum and recognizing training institutes through 
LKPP's accreditation process; and (iii) supporting development of 
training modules for GOI's auditors (inspectors general) to conduct 
compliance and performance audits of the procurement system.
    [cir] Procurement Management Information System to support: (i) 
development of an information technology system to create a data 
warehouse to maintain complete records of procurement activity; (ii) 
testing of a procurement management information system module at pilot 
sites; (iii) establishment of a catalog purchasing system (commonly 
known as an e-catalog system) to ease the administrative burden and 
transaction costs related to purchasing routine commercial products and 
services; and (iv) the development of the procurement procedures and 
standard bidding documents for framework contracting.
    This activity will be implemented in two phases. Phase one will 
pilot the program to test the core elements of the reform program 
across a variety of institutional settings in Indonesia to ensure that 
procurement reform generates the intended results. During phase one, up 
to 30 PSUs will be provided with assistance to build the capability of 
and provide professional credentials to the procurement workforce, and 
to institute improved procurement practices. If certain

[[Page 73694]]

conditions are met,\2\ the successful models developed in phase one 
would then be rolled out to a larger set of existing or newly created 
PSUs under phase two, with a target to create a workforce of 500 
procurement professionals working in permanent, full-time positions in 
established PSUs. It is estimated that this would provide permanent 
staffing for at least 100 PSUs.
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    \2\ Conditions include: (i) Conclusion of an assessment of phase 
one; (ii) achievement of agreed legal and policy changes; (iii) 
agreement regarding the final design of phase two; and (iv) 
demonstration that the projected ERR is at or above 10 percent for 
phase two.
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     Policy and Procedure Development Activity: This activity 
consists of the following two subactivities that, together, address 
major gaps in the procedural framework and operation of the procurement 
system in Indonesia.
    [cir] Competitive Tendering for Public Private Partnerships (PPPs) 
to support: (i) preparation of guidelines and standard bidding 
documents for competitive tendering of PPP projects and development of 
a toolkit with templates and model documents for procurement planning 
and project preparation; (ii) a pilot program to assist trained 
procurement officials to conduct a PPP infrastructure project in at 
least one line ministry or subnational administration; and (iii) 
implementation of recommended adjustments to the e-procurement system 
and a PPP project management system.
    [cir] Procedures for Sustainable Procurement to support the 
development of processes and procedures to meet the GOI's commitment to 
purchasing environmentally-friendly goods and services. Developing the 
sustainable procurement framework will be implemented in three stages--
discovery, establishment, and implementation--leading to a pilot 
program. MCC and the GOI will evaluate this subactivity's performance 
at the end of each stage and will move forward with the next stage only 
upon mutual consent.

2. Compact Budget

------------------------------------------------------------------------
                 Projects and activities                  Millions (US$)
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Green Prosperity Project................................           332.5
(A) Participatory Land Use Planning Activity............            25.0
(B) Technical Assistance and Oversight Activity.........            50.0
(C) Green Prosperity Facility Activity..................           242.5
(D) Green Knowledge Activity............................            15.0
Community-Based Nutrition Project.......................           131.5
(A) Community Projects Activity.........................            81.6
(B) Supply-Side Activity................................            36.0
(C) Communications, Project Management and Evaluations              13.9
 Activity...............................................
Procurement Modernization Project.......................            50.0
(A) Procurement Professionalization Activity............            46.4
(B) Policy and Procedure Activity.......................             3.6
Monitoring and Evaluation...............................            10.2
Program Administration and Control......................            75.8
Program Administration..................................            70.8
Targeted Gender Activities..............................             5.0
                                                         ---------------
    Total Compact Budget................................           600.0
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3. Administration

    The Compact also includes program administration costs estimated at 
$70.8 million over a five-year timeframe, including the costs of 
administration, management, auditing, and fiscal and procurement 
services. In addition, the cost of monitoring and evaluation of the 
Compact and integration of MCC's gender policy is budgeted at 
approximately $15.2 million.

4. Benefits and Beneficiaries

    The Green Prosperity Project is expected to benefit households and 
businesses in targeted districts, primarily through expanded access to 
renewable energy and improved natural resource management. Improved 
land use practices may also indirectly benefit other public and private 
stakeholders downstream or adjacent to Green Prosperity Project 
provinces or districts. The Green Knowledge Activity is expected to 
benefit businesses and households at the national level. Economic rates 
of return are not currently estimated for this project because the 
future impact of subprojects will not be known until the investment 
facility is established and specific projects are identified, 
developed, and assessed. However, activities funded under the Green 
Prosperity Facility, will be required to have an ERR above 10 percent 
(MCC's hurdle rate). A subset of monitoring and evaluation indicators 
and targets for the Green Prosperity Project will be formulated as a 
condition to entry into force of the Compact.
    The Community-Based Nutrition Project is expected to benefit up to 
2.9 million children and their families in up to 7,000 villages by 
enhancing their human capital and lifetime income and reducing health 
costs in several provinces.\3\ The preliminary estimated ERR on this 
project is 13 percent. ERR calculations are an estimate, using the best 
information available at the time. This figure represents a potential 
range of outcomes that account for the uncertainty of core parameters.
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    \3\ West Java, East Java, Nusa Tenggara Timur, Nusa Tenggara 
Barat, Gorontalo, and West Sulawesi.
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    The Procurement Modernization Project is expected to support 
improved performance of up to 100 Procurement Service Units that are 
being established in local and central governments. Beneficiaries of 
this project will be residents and businesses located in and with 
economic relationships in the targeted districts, in addition to those 
benefitting from the public goods and services procured by 
participating national level ministries. Due to this project's 
groundbreaking nature, comparative data do not yet exist to calculate 
an ERR to quantify the benefits of the project. However, as outlined in 
the project description above, the project is structured in two phases. 
Phase one will help quantify the benefits and, in order to proceed with 
phase two, the Compact will require that planned activities have an ERR 
above 10 percent. A subset of monitoring and evaluation indicators and 
targets for the Procurement

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Modernization Project will be formulated as a condition to entry into 
force of the Compact.

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

Millennium Challenge Compact

Table of Contents

Article 1. Goal and Objectives
Section 1.1 Compact Goal
Section 1.2 Project Objectives
Article 2. Funding and Resources
    Section 2.1 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 Accuracy of Information
    Section 3.5 Implementation Letters
    Section 3.6 Procurement and Grants
    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; Expiration
    Section 5.1 Termination; Suspension
    Section 5.2 Consequences of Termination, Suspension or 
Expiration
    Section 5.3 Refunds; Violation
    Section 5.4 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
    Section 6.8 MCC Status
    Section 6.9 Consultations
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
    Schedule I--Green Prosperity Project
    Schedule II--Community-Based Health and Nutrition to Reduce 
Stunting Project
    Schedule III--Procurement Modernization Project
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

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 Indonesia, acting through its ministries and other 
governmental entities as appropriate (the ``Government''). MCC and the 
Government are referred to in this Compact individually as a ``Party'' 
and collectively as the ``Parties''. Capitalized terms used in this 
Compact will have the meanings provided in Annex V.
    Recognizing that the Parties are committed to the shared goals of 
promoting economic growth and the elimination of extreme poverty in 
Indonesia and that MCC assistance under this Compact supports 
Indonesia's demonstrated commitment to strengthening good governance, 
economic freedom and investments in people;
    Recalling that the Government consulted with the private sector and 
civil society of Indonesia to determine the priorities for the use of 
Millennium Challenge Corporation 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 Indonesia implement the program 
described herein to achieve the goal and objectives described herein 
(as such program description and objectives may be amended from time to 
time in accordance with the terms hereof, the ``Program'');
    The Parties hereby agree as follows:

Article 1. Goal and Objectives

Section 1.1 Compact Goal

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

Section 1.2 Project Objectives

    The Program consists of the projects described in Annex I (each a 
``Project'' and collectively, the ``Projects''). The objective of each 
of the Projects (each a ``Project Objective'' and collectively, the 
``Project Objectives'') is to:
    (a) (i) Increase productivity and reduce reliance on fossil fuels 
by expanding renewable energy; and (ii) increase productivity and 
reduce land-based greenhouse gas emissions by improving land use 
practices and management of natural resources (the ``GP Objective'');
    (b) Reduce and prevent low birth weight and childhood stunting and 
malnourishment of children in project areas, and to increase household 
income through cost savings, productivity growth and higher lifetime 
earnings (the ``Nutrition Objective''); and
    (c) Achieve significant government expenditure savings on procured 
goods and services, while assuring their quality satisfies the public 
need, and to achieve the delivery of public services as planned (the 
``Procurement Modernization Objective'').

Article 2. Funding and Resources

Section 2.1 Program Funding

    Upon entry into force of this Compact in accordance with Section 
7.3, MCC shall grant to the Government, under the terms of this 
Compact, an amount not to exceed Five Hundred Eighty-Eight Million 
United States Dollars (US$588,000,000) (``Program Funding'') for use by 
the Government to implement the Program. The allocation of Program 
Funding is generally described in Annex II.

Section 2.2 Compact Implementation Funding

    (a) Upon signature of this Compact, MCC shall grant to the 
Government, under the terms of this Compact and in addition to the 
Program Funding described in Section 2.1, an amount not to exceed 
Twelve Million United States Dollars (US$12,000,000) (``Compact 
Implementation Funding'') under Section 609(g) of the Millennium 
Challenge Act of 2003, as amended (the ``MCA Act''), for use by the 
Government to facilitate implementation of the Compact, including for 
the following purposes:
    (i) Financial management and procurement activities (including 
costs related to standby agents procured by MCC);
    (ii) Administrative activities (including start-up costs such as 
staff salaries) and administrative support expenses such as rent, 
computers and other information technology or capital equipment;
    (iii) Monitoring and evaluation activities;
    (iv) Feasibility studies and assessments; and
    (v) Other activities to facilitate Compact implementation as 
approved by MCC. The allocation of Compact Implementation Funding is 
generally described in Annex II.

[[Page 73696]]

    (b) In accordance with Section 7.5, this Section 2.2 and other 
provisions of this Compact applicable to Compact Implementation Funding 
shall 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 shall be 
subject to satisfaction of the conditions precedent to such 
disbursement as set forth in Annex IV.
    (d) If MCC determines that the full amount of Compact 
Implementation Funding available under Section 2.2(a) exceeds the 
amount that reasonably can be utilized for the purposes set forth in 
Section 2.2(a), MCC, by written notice to the Government, may withdraw 
the excess amount, thereby reducing the amount of the Compact 
Implementation Funding available under 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) 
shall be reduced by the Excess CIF Amount, and MCC shall 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 shall be subject to the terms and conditions 
of this Compact 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,'' and includes any 
refunds or reimbursements of Program Funding or Compact Implementation 
Funding paid by the Government in accordance with this Compact.

Section 2.4 Disbursement

    In accordance with this Compact and the Program Implementation 
Agreement, MCC shall disburse MCC Funding for expenditures incurred in 
furtherance of the Program (each instance, a ``Disbursement''). Subject 
to the satisfaction of all applicable conditions precedent, the 
proceeds of Disbursements shall be made available to the Government, at 
MCC's sole election, by (a) deposit to one or more bank accounts 
established by the Government and acceptable to MCC (each, a 
``Permitted Account'') or (b) direct payment to the relevant provider 
of goods, works or services for the implementation of the Program. MCC 
Funding may be expended only for Program expenditures.

Section 2.5 Interest

    The Government shall pay or transfer to MCC, in accordance with the 
Program Implementation Agreement, any interest or other earnings that 
accrue on MCC Funding prior to such funding being used for a Program 
purpose.

Section 2.6 Government Resources; Budget

    (a) The Government shall provide all funds and other resources, and 
shall take all actions, that are necessary to carry out the 
Government's responsibilities under this Compact.
    (b) The Government shall use its best efforts to ensure that all 
MCC Funding it receives or is projected to receive in each of its 
fiscal years is fully accounted for in its annual budget on a multi-
year basis.
    (c) The Government shall not reduce the normal and expected 
resources that it would otherwise receive or budget from sources other 
than MCC for the activities contemplated under this Compact and the 
Program.
    (d) Unless the Government discloses otherwise to MCC in writing, 
MCC Funding shall 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 shall ensure that MCC Funding is not 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 www.mcc.gov (the ``MCC 
Web site''), including but not limited to the following purposes:
    (a) For assistance to, or training of, the military, police, 
militia, national guard or other quasi-military organization or unit;
    (b) For any activity that is likely to cause a substantial loss of 
United States jobs or a substantial displacement of United States 
production;
    (c) To undertake, fund or otherwise support any activity that is 
likely to cause a significant environmental, health, or safety hazard, 
as further described in MCC's Environmental Guidelines and any guidance 
documents issued in connection with the guidelines posted from time to 
time on the MCC Web site or otherwise made available to the Government 
(collectively, 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 specifically agree otherwise in writing, the 
Government shall ensure that all MCC Funding is free from the payment 
or imposition of any existing or future taxes, duties, levies or other 
similar charges (but not fees or charges for services that are 
generally applicable in Indonesia, reasonable in amount and imposed on 
a non-discriminatory basis) (``Taxes'') in Indonesia (including any 
such Taxes imposed by a national, regional, local or other governmental 
or taxing authority in Indonesia) in accordance with prevailing tax 
laws and regulations in Indonesia. In addition, should any Tax be 
levied and paid using MCC Funding in accordance with such prevailing 
tax laws and regulations in Indonesia, such Taxes will be reimbursed in 
accordance with the Minister of Finance regulation referenced in sub-
section (b) below.
    Specifically, and without limiting the generality of the foregoing, 
MCC Funding shall be free from the payment of:
    (i) Customs duties, import taxes, and other similar charges on any 
goods, works or services introduced into Indonesia in connection with 
the Program;
    (ii) Value added tax, sales tax on luxury items, excise tax, 
property transfer tax, and other similar charges on any transactions 
involving goods, works or services in connection with the Program;
    (iii) Taxes and other similar charges on ownership, possession or 
use of any property in connection with the Program; and
    (iv) Taxes and other similar charges on income, profits or gross 
receipts attributable to work performed in connection with the Program 
and related social security taxes and other similar charges on all 
natural or legal persons performing work in connection with the Program 
except: (1) Natural persons who are citizens or permanent

[[Page 73697]]

residents of Indonesia; and (2) legal persons formed under the laws of 
Indonesia (but excluding MCA-Indonesia, which is formed for the purpose 
of implementing the Government's obligations hereunder).
    (b)(i) The mechanisms that the Government shall use to implement 
the tax exemption required by Section 2.8(a) are set forth in the 
Program Implementation Agreement. Such mechanisms shall include 
exemptions from the payment of Taxes that have been granted in 
accordance with applicable law, or reimbursement of Taxes by the 
Government to MCA-Indonesia or to the taxpayer. In the case of 
reimbursement, the Minister of Finance shall issue a regulation 
governing the manner in which such reimbursements shall be implemented.
    (ii) For those Taxes for which reimbursement shall be the method of 
implementation, if a Tax has been paid in accordance with existing Tax 
laws and regulations, the Government shall reimburse to MCA-Indonesia 
or the taxpayer an amount equal to the amount of Tax paid in the 
currency of Indonesia within thirty (30) working days (or such other 
period as may be agreed in writing by the Parties) after the 
fulfillment of all required documentation by MCA-Indonesia.
    (c) If a Tax has been paid contrary to the requirements of Sections 
2.8(a) or (b) or the Program Implementation Agreement, or if a 
reimbursement has not been properly issued in accordance with Section 
2.8(b)(ii) or the Program Implementation Agreement, the Government 
shall reimburse promptly to MCC (or if directed by MCC, to MCA-
Indonesia) the amount of such Tax in United States dollars or the 
currency of Indonesia 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-Indonesia) attaching the 
relevant documents evidencing that such Tax has been paid.
    (d) No MCC Funding, proceeds thereof or Program Assets may be 
applied by the Government in satisfaction of its obligations under 
Section 2.8(c).

Article 3. Implementation

Section 3.1 Program Implementation Agreement

    The Parties shall enter into an agreement providing further detail 
on the implementation arrangements, fiscal accountability and 
disbursement and use of MCC Funding, among other matters (the ``Program 
Implementation Agreement'' or ``PIA''); and the Government shall 
implement the Program in accordance with this Compact, the PIA, any 
Supplemental Agreement and any Implementation Letter.

Section 3.2 Government Responsibilities

    (a) The Government has principal responsibility for overseeing and 
managing the implementation of the Program.
    (b) With the prior written consent of MCC, the Government may 
designate an entity to be established through passage of a ministerial 
decree or other legal instrument acceptable to MCC and its implementing 
regulation (together, the ``Establishment Decree''), as the accountable 
entity to implement the Program and to exercise and perform the 
Government's right and obligation to oversee, manage and implement the 
Program, including without limitation, managing the implementation of 
Projects and their Activities, allocating resources and managing 
procurements. Such entity is referred to herein as ``MCA-Indonesia,'' 
and will have the authority to bind the Government with regard to all 
Program activities. The designation contemplated by this Section 3.2(b) 
shall not relieve the Government of any obligations or responsibilities 
hereunder or under any related agreement, for which the Government 
remains fully responsible. MCC hereby acknowledges and consents to the 
designation in this Section 3.2(b).
    (c) The Government shall ensure that any Program 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 MCC 
agrees otherwise in writing.
    (d) The Government shall take all necessary or appropriate steps to 
achieve the Project Objectives during the Compact Term (including, 
without limiting Section 2.6(a), funding all costs that exceed MCC 
Funding and are required to carry out the terms hereof and achieve such 
objectives, unless MCC agrees otherwise in writing).
    (e) The Government shall fully comply with the Program Guidelines, 
as applicable, in its implementation of the Program.
    (f) The Government shall grant to MCC a perpetual, irrevocable, 
royalty-free, worldwide, fully paid, assignable right and license to 
practice or have practiced on its behalf (including the right to 
produce, reproduce, publish, repurpose, use, store, modify, or make 
available) any portion or portions of Intellectual Property as MCC sees 
fit in any medium, now known or hereafter developed, for any purpose 
whatsoever.

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 shall 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 Accuracy of Information

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

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 shall apply such guidance in implementing the Program. The 
Parties may also issue jointly agreed-upon Implementation Letters 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 and Grants

    (a) Notwithstanding the Government's commitment to procurement 
reform as demonstrated by Indonesian law, the Government shall ensure 
that the procurement of all goods, works and services by the Government 
or any Provider to implement the Program shall be consistent with the 
``MCC Program Procurement Guidelines'' posted from time to time on the 
MCC Web site (the ``MCC Program Procurement Guidelines''). The MCC 
Program Procurement Guidelines include the following requirements, 
among others:
    (i) 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;
    (ii) Solicitations for goods, works, and services must be based 
upon a clear and accurate description of the goods, works and services 
to be acquired;
    (iii) Contracts must be awarded only to qualified contractors that 
have the capability and willingness to perform the contracts in 
accordance with their

[[Page 73698]]

terms on a cost effective and timely basis; and
    (iv) No more than a commercially reasonable price, as determined, 
for example, by a comparison of price quotations and market prices, 
shall be paid to procure goods, works and services.
    (b) The Government shall ensure that any grant issued to any non-
governmental entity in furtherance of the Program (the ``Grant'') is 
selected, implemented and administered pursuant to open, fair, and 
competitive procedures administered in a transparent manner. In 
furtherance of this requirement, and prior to the issuance of any 
Grant, the Government and MCC shall agree upon written procedures to 
govern the identification of potential recipients, the selection and 
the award of Grants. Such agreed procedures shall be posted on the MCA-
Indonesia Web site.

Section 3.7 Records; Accounting; Covered Providers; Access

    (a) Government Books and Records. The Government shall maintain, 
and shall use its best efforts to ensure that all Covered Providers 
maintain, accounting books, records, documents and other evidence 
relating to the Program adequate to show, to MCC's satisfaction, the 
use of all MCC Funding and the implementation and results of the 
Program (``Compact Records''). In addition, the Government shall 
furnish or cause to be furnished to MCC, upon its request, originals or 
copies of such Compact Records.
    (b) Accounting. The Government shall maintain and shall 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 Indonesia. Compact Records shall 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 applicable legal 
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 US$50,000 in the aggregate of MCC 
Funding (other than as salary or compensation as an employee of an 
entity of the Government) during the Compact Term. A ``Covered 
Provider'' is: (i) A non-United States Provider that receives (other 
than pursuant to a direct contract or agreement with MCC) US$300,000 or 
more of MCC Funding in any Government fiscal year or any other non-
United States person or entity that receives, directly or indirectly, 
US$300,000 or more of MCC Funding from any Provider in such fiscal 
year; or (ii) any United States Provider that receives (other than 
pursuant to a direct contract or agreement with MCC) US$500,000 or more 
of MCC Funding in any Government fiscal year or any other United States 
person or entity that receives, directly or indirectly, US$500,000 or 
more of MCC Funding from any Provider in such fiscal year.
    (d) Access. Upon MCC's request, the Government, at all reasonable 
times, shall permit, or cause to be permitted, authorized 
representatives of MCC, an authorized Inspector General of MCC 
(``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, assets and activities 
funded in whole or in part by MCC Funding.

Section 3.8 Audits; Reviews

    (a) Government Audits. Except as the Parties may agree otherwise in 
writing, the Government shall, on at least a semi-annual basis, 
conduct, or cause to be conducted, financial audits of all 
disbursements of MCC Funding covering the period from signing of this 
Compact until the earlier of the following December 31 or June 30 and 
covering each six-month period thereafter ending December 31 and June 
30, through the end of the Compact Term. In addition, upon MCC's 
request, the Government shall 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 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 shall be 
performed in accordance with the Audit Guidelines and be subject to 
quality assurance oversight by the Inspector General. Each audit shall 
be completed and the audit report delivered to MCC no later than 90 
days after the first period to be audited and no later than 90 days 
after each June 30 and December 31 thereafter, or such other period as 
the Parties may otherwise agree in writing.
    (b) Audits of Other Entities. The Government shall ensure that MCC 
financed agreements between the Government or any Provider, on the one 
hand, and (i) a United States nonprofit organization, on the other 
hand, state that the United States nonprofit organization is subject to 
the applicable audit requirements contained in OMB Circular A-133, 
``Audits of States, Local Governments, and Non-Profit Organizations,'' 
issued by the United States Office of Management and Budget; (ii) a 
United States for-profit Covered Provider, on the other hand, state 
that the United States for-profit organization is subject to audit by 
the applicable United States Government agency, unless the Government 
and MCC agree otherwise in writing; and (iii) a non-U.S. Covered 
Provider, on the other hand, state that the non-U.S. Covered Provider 
is subject to audit in accordance with the Audit Guidelines.
    (c) Corrective Actions. The Government shall use its best efforts 
to ensure that each Covered Provider: (i) Takes, where necessary, 
appropriate and timely corrective actions in response to audits; (ii) 
considers whether the results of the Covered Provider's audit 
necessitates adjustment of the Government's records; and (iii) permits 
independent auditors to have access to its records and financial 
statements as necessary.
    (d) Audit by MCC. MCC shall have the right to arrange for audits of 
the Government's use of MCC Funding.
    (e) Cost of Audits, Reviews or Evaluations. MCC Funding may be used 
to fund the costs of any audits, reviews or evaluations required under 
this Compact.

Article 4. Communications

Section 4.1 Communications

    Any document or communication required or submitted by either Party 
to the other under this Compact shall be in writing and, except as 
otherwise agreed with MCC, in English. For this purpose, the address of 
each Party is set forth below.
    To MCC:
    Millennium Challenge Corporation, Attention: Vice President, 
Department of Compact Operations, (with a copy to the Vice President 
and General

[[Page 73699]]

Counsel), 875 Fifteenth Street NW., Washington, DC 20005, United States 
of America, Facsimile: +1 (202) 521-3700, Telephone: +1 (202) 521-3600, 
Email: [email protected]: (Vice President, Compact Operations), 
[email protected] (Vice President and General Counsel)
To the Government:
    Ministry of National Development Planning/National Development 
Planning Agency (BAPPENAS), Attention: Vice Minister of National 
Development Planning, Jalan Taman Suropati 2, Jakarta Pusat 10310, 
Republic of Indonesia, Facsimile: +62 (21) 3103314, Telephone: +62 (21) 
336207, 3905650
To MCA-Indonesia:
    Upon establishment of MCA-Indonesia, MCA-Indonesia will notify the 
Parties of its contact details.

Section 4.2 Representatives

    For all purposes of this Compact, the Government shall be 
represented by the individual holding the position of, or acting as, 
Vice Minister of National Development Planning (BAPPENAS) of the 
Republic of Indonesia, and MCC shall be represented by the individual 
holding the position of, or acting as, Vice President, Department of 
Compact Operations (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 designates the 
Chairman of MCA-Indonesia as an Additional Representative. MCC hereby 
designates the Deputy Vice President, Department of Compact Operations, 
Europe, Asia, Pacific and Latin America, as an Additional 
Representative. A Party may change its Principal Representative to a 
new representative that holds a position of equal or higher authority 
upon written notice to the other Party.

Section 4.3 Signatures

    Signatures to this Compact and to any amendment to this Compact 
shall be original signatures appearing on the same page or in an 
exchange of letters or diplomatic notes. With respect to all documents 
arising out of this Compact (other than the Program Implementation 
Agreement) and amendments thereto, signatures may be delivered by 
facsimile or electronic mail and in counterparts and shall be binding 
on the Party delivering such signature to the same extent as an 
original signature would be.

Article 5. Termination; Suspension; Expiration

Section 5.1 Termination; Suspension

    (a) Either Party may terminate this Compact without cause in its 
entirety by giving the other Party thirty (30) days' prior written 
notice. MCC may also terminate this Compact or MCC Funding without 
cause in part by giving the Government thirty (30) days' prior 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 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 makes it 
probable that 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;
    (iv) The Government or any other person or entity receiving MCC 
Funding or using Program Assets 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 Indonesia 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 such act or any other provision of law;
    (vi) The Government has engaged in a pattern of actions 
inconsistent with the criteria used to determine the eligibility of 
Indonesia for assistance under the MCA Act; and
    (vii) The Government or another person or entity receiving MCC 
Funding or using Program Assets is found to have been convicted of a 
narcotics offense or to have been engaged in drug trafficking.

Section 5.2 Consequences of Termination, Suspension or Expiration

    (a) Upon the suspension or termination, in whole or in part, of 
this Compact or any MCC Funding, or upon the expiration of this 
Compact, the provisions of Section 4.2 of the Program Implementation 
Agreement shall govern the post-suspension, post-termination or post-
expiration treatment of MCC Funding, any related Disbursements and 
Program Assets. Any portion of this Compact, MCC Funding, the Program 
Implementation Agreement or any other Supplemental Agreement that is 
not suspended or terminated shall remain in full force and effect.
    (b) 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 5.3 Refunds; Violation

    (a) If any MCC Funding, any interest or earnings thereon, or any 
Program Asset is used for any purpose in violation of the terms of this 
Compact, then MCC may require the Government to repay to MCC in United 
States Dollars the value of the misused MCC Funding, interest, 
earnings, or asset, plus interest within thirty (30) days after the 
Government's receipt of MCC's request for repayment. The Government 
shall not use MCC Funding, proceeds thereof or Program Assets to make 
such payment.
    (b) Notwithstanding any other provision in this Compact or any 
other existing agreement to the contrary, MCC's right under Section 
5.3(a) to obtain a refund shall 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 5.4 Survival

    The Government's responsibilities under Sections 2.7, 3.7, 3.8, 
5.2, 5.3, and 6.4 shall 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.

[[Page 73700]]

Section 6.2 Amendments

    (a) The Parties may amend this Compact only by a written agreement 
signed by the Principal Representatives (or such other government 
official designated by the Principal Representative, provided prior 
notice is given to the other Party).
    (b) Notwithstanding Section 6.2(a), the Parties may agree in 
writing, signed by the Principal Representatives (or such other 
government official designated by the Principal Representative, 
provided prior notice is given to the other Party) or any Additional 
Representative, to modify any Annex to: (i) Suspend, terminate or 
modify any Project or Activity, or to create a new project; (ii) change 
the allocations of funds as set forth in Annex II as of the date hereof 
(including to allocate funds to a new project); (iii) modify the 
Implementation Framework described in Annex I; or (iv) add, delete or 
waive any condition precedent described in Annex IV; provided that, in 
each case, any such modification: (1) Is consistent in all material 
respects with the Project Objectives; (2) does not cause the amount of 
Program Funding to exceed the aggregate amount specified in Section 2.1 
(as may be modified by operation of Section 2.2(e)); (3) does not cause 
the amount of Compact Implementation Funding to exceed the aggregate 
amount specified in Section 2.2(a); (4) does not reduce the 
Government's responsibilities or contribution of resources required 
under Section 2.6; and (5) does not extend the Compact Term.

Section 6.3 Inconsistencies

    In the event of any conflict or inconsistency between:
    (a) any Annex and any of Articles 1 through 7, such Articles 1 
through 7, as applicable, 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 shall be 
governed by the principles of international law.

Section 6.5 Additional Instruments

    Any reference to activities, obligations or rights undertaken or 
existing under or in furtherance of this Compact or similar language 
shall include activities, obligations and rights undertaken by, 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 
shall be deemed a reference to such document or information as updated 
or substituted on the MCC Web site from time to time.

Section 6.7 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 shall 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 
shall 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 assume no liability for any claims or 
loss arising out of activities or omissions under this Compact. The 
Government waives any and all claims against MCC or the United States 
Government or any current or former officer or employee of MCC or the 
United States Government for all loss, damage, injury, or death arising 
out of activities or omissions under this Compact, and agrees that it 
will not bring any claim or legal proceeding of any kind against any of 
the above entities or persons for any such loss, damage, injury, or 
death. The Government agrees that MCC and the United States Government 
or any current or former officer or employee of MCC or the United 
States Government will be immune from the jurisdiction of all courts 
and tribunals of Indonesia for any claim or loss arising out of 
activities or omissions under this Compact.

Section 6.9 Consultations

    Either Party may, at any time, request consultations relating to 
the interpretation or implementation of this Compact. Such 
consultations will begin at the earliest possible date.

Article 7. Entry Into Force

Section 7.1 Domestic Requirements

    Before this Compact enters into force, the Government shall proceed 
in a timely manner to complete all of its domestic requirements 
necessary for this Compact and the PIA to enter into force as an 
international agreement.

Section 7.2 Conditions Precedent to Entry Into Force

    Before this Compact enters into force:
    (a) The PIA shall have been signed by the parties thereto;
    (b) The Government shall have delivered to MCC:
    (i) A letter signed and dated by the Principal Representative of 
the Government, or such other duly authorized representative of the 
Government acceptable to MCC, confirming that the Government has 
completed its domestic requirements necessary for this Compact to enter 
into force and that the other conditions precedent to entry into force 
in this Section 7.2 have been met;
    (ii) A signed legal opinion from the Minister of Law and Human 
Rights of Indonesia (or such other legal representative of the 
Government acceptable to MCC), in form and substance satisfactory to 
MCC; and
    (iii) Complete, certified copies of all decrees, legislation, 
regulations or other governmental documents relating to the 
Government's domestic requirements necessary for this Compact to enter 
into force and the satisfaction of Section 7.1, which MCC may post on 
its Web site or otherwise make publicly available;
    (c) MCC shall not have determined that after signature of this 
Compact, the Government has engaged in a pattern of actions 
inconsistent with the eligibility criteria for MCC Funding;
    (d) Annex III shall have been modified by the Parties to reflect 
final Indicators and Targets (as such are defined in Annex III) for 
each Project; and
    (e) The Government shall ensure either: (i) That the PSF (as 
defined in Schedule 2 to Annex I) is extended through the end of the 
Compact Term; or (ii) the Government provides an alternative 
implementation structure acceptable to MCC, together with a timeline 
for transition of the management of the Community-Based Nutrition 
Project.

Section 7.3 Date of Entry Into Force

    This Compact shall enter into force on the date of the letter from 
MCC to the Government in an exchange of letters confirming that MCC has 
completed its domestic requirements for entry into

[[Page 73701]]

force of this Compact and that the conditions precedent to entry into 
force in Section 7.2 have been met.

Section 7.4 Compact Term

    This Compact shall 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 shall 
provisionally apply the terms of this Compact; provided that, no MCC 
Funding, other than Compact Implementation Funding, shall 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 Bali, Indonesia, this 19th day of November, 2011, in the 
English language only.
    For the United States of America, Name: Hillary Rodham Clinton, 
Title: Secretary of State and Chair, Board of Directors, Millennium 
Challenge Corporation.
    For the Republic of Indonesia, Name: Agus D.W. Martowardojo, Title: 
Minister of Finance.

Annex I: Program Description

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

A. Program Overview

1. Background and Consultative Process
    (a) Background.
    Indonesia was selected by MCC's Board of Directors as eligible for 
a compact in December 2008. MCC recognized that in spite of a crowded 
field of other development partners, MCC's business model offered the 
Government new opportunities to approach persistent development 
problems using new approaches. The Government, through the National 
Development Planning/National Development Planning Agency 
(``BAPPENAS''), appointed a national program coordinator in June 2009. 
The results of an interim constraints analysis funded by the Asian 
Development Bank, the International Labour Organization, and the 
Islamic Development Bank became available in November 2009, with the 
final report published in August 2010.
    In mid-September 2009, BAPPENAS issued two ministerial decrees to 
establish the Tim Pengarah or Steering Committee (``SC''), made up of 
high-ranking Indonesian officials and members of civil society, 
academia, and the private sector that would coordinate the MCC compact 
development process, supported by two other coordinating teams. 
BAPPENAS then hired a fourth team, Tim Ahli (experts team), to do the 
work that MCC associates with the core team in other countries, guiding 
and assisting with concept paper development and due diligence. The SC, 
supported by Tim Ahli, produced a foundational document describing 
priority areas for MCC investment.
    (b) Consultative Process.
    To formulate initial project concept proposals, BAPPENAS engaged in 
an inclusive consultative process, holding consultations in several 
regions across Indonesia and inspiring praise within the donor 
community in Indonesia. The SC led a process to solicit and then select 
from nearly 400 concept papers, and BAPPENAS formally submitted 13 
concept papers to MCC in June 2010.
2. Description of Program and Beneficiaries
    (a) Description.
    The Program consists of three Projects: Community-Based Health and 
Nutrition to Reduce Stunting, Green Prosperity and Procurement 
Modernization. These Projects respond to constraints to economic growth 
and were highlighted as priorities in the Government's national 
development strategies.
    Each Project is generally described in the Schedules to this Annex 
I. The Schedules to this Annex I also identify one or more of the 
activities that will be undertaken in furtherance of each Project 
(each, an ``Activity'') as well as the various sub-activities within 
each Project Activity.
    (b) Beneficiaries.
    While Indonesia is a relatively new democracy, much has been 
achieved over the past decade. The country has seen positive economic 
growth, witnessed large reductions in poverty, and has made continued 
progress towards many of its Millennium Development Goal targets for 
2015. However, in spite of this progress, over 32 million Indonesians 
live near the national poverty line and approximately half of all 
households remain clustered around the national poverty line set at 
200,262 rupiah per person per month (US$23 as of August 2011). The pace 
of poverty reduction has slowed and the poverty incidence in 2009 was 
only 3.5 percentage points lower than that in 1996. Meanwhile, many of 
the critical institutional challenges of reform have not yet been 
addressed. Decentralization was intended to bring government closer to 
the people, but in many places local leaders assign a low priority to 
the delivery of social services and investments in essential 
infrastructure, both of which are emerging as important constraints on 
the country's continuing economic growth.
    Each Project of the Compact is intended to further poverty 
reduction through economic growth. Specific beneficiaries are 
identified as part of the Project description in each Schedule to this 
Annex I.
3. Environmental and Social Safeguards
    All of the Projects will be implemented in compliance with the MCC 
Environmental Guidelines and the MCC Gender Policy, and any 
resettlement will be carried out in accordance with the World Bank's 
Operational Policy on Involuntary Resettlement in effect as of July 
2007 (``OP 4.12'') in a manner acceptable to MCC. In accordance with 
its policies, the Government will 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. Specifically, the Government will: (a) Cooperate with or 
complete, as the case may be, any ongoing environmental assessments, or 
if necessary undertake and complete any additional environmental 
assessments, social assessments, environmental management plans, 
environmental and social audits, resettlement policy frameworks, and 
resettlement action plans required under the laws of Indonesia, the MCC 
Environmental Guidelines, this Compact, the PIA, or any Supplemental 
Agreement, or as otherwise required by MCC, each in form and substance 
satisfactory to MCC; (b) ensure that Project-specific environmental and 
social management plans are developed and all relevant measures 
contained in such plans are integrated into project design, the 
applicable procurement documents and associated finalized contracts, in 
each case, in form and substance satisfactory to MCC; and (c) implement 
to MCC's satisfaction appropriate environmental and social mitigation 
measures identified in such assessments or plans. Unless MCC agrees 
otherwise in writing, the Government will fund all necessary costs of 
environmental and social mitigation measures (including, without 
limitation, costs of resettlement) not specifically provided for, or 
that exceed the MCC Funding specifically allocated for such costs in, 
the Detailed Financial Plan for any Project.
    To maximize the positive social impacts of the Projects, address 
cross-

[[Page 73702]]

cutting social and gender issues such as human trafficking, child and 
forced labor, and HIV/AIDS, and to ensure compliance with the MCC 
Gender Policy, the Government will: (x) 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 (``Social and Gender 
Integration Plan''); and (y) ensure, through monitoring and 
coordination during implementation, that final Activity designs, 
construction tender documents and implementation plans are consistent 
with and incorporate the outcomes of the social and gender analyses and 
social and gender integration plan.
    To address gender concerns that impact women's ability to 
participate across Projects, MCA-Indonesia will adopt a detailed 
workplan, subject to MCC approval, for gender work to be undertaken at 
the policy, institutional capacity building and community levels (the 
``Targeted Gender Activities''). Annex II sets forth the MCC Funding 
allocated for the performance of the Targeted Gender Activities. Prior 
to the second disbursement of MCC Funding for the Targeted Gender 
Activities, MCA-Indonesia shall have completed detailed action plans 
and provided evidence of demonstrated commitment of relevant 
stakeholders to addressing policy constraints identified in the 
workplan.

B. Description of Projects

    Set forth in the attached Schedules 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, including sub-activities, are also described.

C. Implementation Framework

1. Accountable Entity: General
    Unless otherwise agreed by MCC, MCA-Indonesia will be a trust fund 
entity established under the authority contemplated by the forthcoming 
Presidential regulation (Peraturan Presiden) regarding the 
establishment of trust funds and a subsequent ministerial decree 
(Peraturan Menteri Negara) creating MCA-Indonesia. MCA-Indonesia will 
have the primary purpose of acting as the Government's primary agent to 
implement the Program and perform the Government's right and obligation 
to oversee, manage and implement the Program.
2. Board of Trustees
    MCA-Indonesia will be governed by a Board of Trustees (``Board''). 
The Board will have independent decision making authority and will have 
ultimate authority and responsibility for the oversight, direction and 
decisions of MCA-Indonesia, and for the overall implementation of the 
Program in accordance with this Compact, the Program Implementation 
Agreement and all Supplemental Agreements. The Board will be comprised 
of voting and non-voting members as set forth in the implementing 
regulations of MCA-Indonesia (``Implementing Regulations'').
3. Implementing Team
    An implementing team (``Implementing Team'') will have the 
principal responsibility (subject to the direction and oversight of the 
Board and to any applicable approval or other rights of MCC) for the 
day-to-day management of the Program, including those roles and 
responsibilities specifically set forth in the Program Implementation 
Agreement. The specific duties of the Implementing Team are set forth 
in the Implementing Regulations.
4. Stakeholders Groups
    MCA-Indonesia will include one (1) or more stakeholders groups 
(each a ``Stakeholders Group'' and together the ``Stakeholders 
Groups'') to provide advice and input to MCA-Indonesia and to 
disseminate information concerning Compact implementation to the 
public. Each such Stakeholders Group shall represent the constituencies 
of the various Projects. The role and responsibilities of the 
Stakeholders Groups are as set forth in the Implementing Regulations.
5. Implementing Entities
    Subject to the terms and conditions of this Compact and any other 
related agreement entered into in connection with this Compact, the 
Government may engage one or more entities of the Government to 
implement and carry out any Project or Activity (or a component 
thereof) to be carried out in furtherance of this Compact (each, an 
``Implementing Entity''). The appointment of 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, in form and 
substance satisfactory to MCC (each an ``Implementing Entity 
Agreement'').
6. Fiscal Agent
    Unless MCC agrees otherwise in writing, the Government will engage 
a fiscal agent (a ``Fiscal Agent''), which will be responsible for 
assisting the Government with its fiscal management and assuring 
appropriate fiscal accountability of MCC Funding, and whose duties will 
include those set forth in the Program Implementation Agreement.
7. Procurement Agent
    Unless MCC agrees otherwise in writing, the Government 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 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 the Government pursuant 
to the Program Implementation Agreement, unless MCC agrees otherwise in 
writing.

Schedule 1 to Annex I--Green Prosperity Project

    This Schedule 1 generally describes and summarizes the key elements 
of the project that the Parties intend to implement in furtherance of 
the Green Prosperity Objective (the ``GP Project'').

1. Summary of Project and Activities

    The majority of Indonesia's poor live in rural areas rich in 
natural resources but over-extraction and inadequate management of 
these resources compromises Indonesia's ability to sustain high rates 
of economic growth and reduce poverty. At the same time, it is 
estimated that over 10,000 villages in Indonesia do not have access to 
reliable and affordable electricity, and many more rely on expensive 
diesel generation. Illegal logging, land conversion for agriculture, 
water pollution, and other unsustainable land use practices are 
adversely affecting the natural assets that people rely on for their 
livelihoods and wellbeing.

[[Page 73703]]

Indonesia is among the top emitters of greenhouse gases in the world. 
The majority of greenhouse gas emissions result from deforestation and 
land use conversion; however, emissions from energy and industrial 
sources are growing rapidly. The lack of clear data on land resource 
use and jurisdictional boundaries between villages and districts 
significantly hinders Government agencies and land use planners from 
managing critical natural resources effectively. Ultimately, protecting 
Indonesia's natural resource base in the face of demographic, social, 
and economic forces requires sustainable and equitable economic 
alternatives.
    The Government is committed to a more sustainable, less carbon 
intensive future. The Government has made a commitment to reduce 
greenhouse gas emissions by 26 percent by 2020 while maintaining a 
target of seven (7) percent annual economic growth. Increasing access 
to clean and reliable energy in rural areas and improving the 
stewardship of natural assets are critical priorities to achieving this 
goal.
    The GP Project will promote environmentally sustainable, low carbon 
economic growth as set forth in the Government's medium- to long-term 
development plans (RPJP and RPJM), the National Greenhouse Gas Emission 
Reduction Action Plan (RAN-GRK), and Regional Spatial Plans (RTRW) 
(each a ``Plan''). The GP Project will provide a combination of 
technical and financial assistance to support rural economic 
development that raises real incomes of Indonesians in a manner that 
reduces reliance on fossil fuels, improves land management practices, 
protects natural capital, and complements efforts to reduce emissions 
from deforestation and environmental degradation. The GP Project will 
involve local communities and governments in activities to improve the 
clarity and implementation of government policies and regulations that 
support low carbon development, as well as build capacity of local 
communities in natural resource and environmental management, and will 
be guided by an integrated river basin management approach.
    The centerpiece of the GP Project is a funding facility (the ``GP 
Facility'') that will support investments in two thematic areas: 
renewable energy and sustainable management of natural resources. These 
investments are intended to have mutually reinforcing benefits of 
enhancing sustainable economic growth and social conditions while also 
reducing Indonesia's carbon footprint and aligning incentives and 
practices to foster improved environmental stewardship.
    The GP Project consists of four Activities:
     Investing in administrative boundary setting, updating and 
integration of land use inventories and enhancing spatial plans at the 
district and provincial levels (``Participatory Land Use Planning 
Activity'');
     Provision of technical assistance and project oversight 
(the ``Technical Assistance and Oversight Activity'');
     Financing of low-carbon development projects through the 
establishment of a funding facility (the ``GP Facility Activity''); and
     Provision of technical assistance and support for 
strengthening local, provincial, and national capacity to drive forward 
Indonesia's nation-wide low carbon development strategy within the 
context of the GP Project (``Green Knowledge Activity'').
    The GP Project will concentrate in provinces and districts which 
have the highest potential for achieving poverty alleviation and 
environmental objectives. Candidate provinces include Riau, Jambi, West 
Sumatra, South Sumatra, Bengkulu, West Sulawesi, South Sulawesi, 
Southeast Sulawesi, West Kalimantan, East Kalimantan, West Nusatenggara 
and East Nusatenggara. The Parties agree to start the GP Project in two 
districts in each of Jambi and West Sulawesi. The inclusion of other 
provinces and districts in the GP Project after entry into force shall 
be subject to mutual agreement between the Parties.
    In order to facilitate the implementation of the Project, certain 
of the activities stipulated in subsections (a) and (b) below will be 
tested in Jambi and West Sulawesi prior to entry into force, subject to 
the terms and conditions of Section 2.2 of this Compact. After entry 
into force, the approach stipulated in subsections (a) and (b) may be 
modified, as may be necessary or appropriate, to reflect lessons 
learned from the test sites.
    Except with respect to the Green Knowledge Activity, which is 
national in scope, the GP Project will provide funding at the district 
level, favoring, where possible, contiguous districts within the same 
river basin. The GP Project will focus funding in districts prioritized 
by means of a readiness assessment. District selection indicators in 
such assessment will include poverty levels (income levels and other 
indicators), renewable energy potential, economic growth potential, 
governance, forest cover and peatlands under threat of degradation or 
destruction. The GP Project will only assist those districts which (i) 
have spatial plans at either the district or provincial level that have 
been granted substantive approval (Persetujuan Substansi) by the Badan 
Koordinasi Penataan Ruang Nasional (BKPRN), (ii) agree to make 
information on the location of village settlements accessible to the 
public, (iii) agree to make licensing information related to natural 
resource use (legally issued licenses and those in process) accessible 
to the public, and (iv) agree to make the licensing process transparent 
and accessible. MCA-Indonesia shall enter into agreements with each 
district specifying these and other matters, and making clear that the 
failure by any district to comply with its commitments under such an 
agreement may lead to termination of GP Project investments for that 
district at any time during the Compact Term. These agreements will 
specify milestones for the implementation of the Activities (a) through 
(c) below.
    Key implementing partners and project sponsors are expected to 
include local governments and institutions; private enterprises in the 
agriculture, forestry, water and energy sectors; financial 
institutions; small-holder farmers; and local and international civil 
society organizations.
    (a) Participatory Land Use Planning Activity.
    The purpose of the Participatory Land Use Planning Activity is to 
ensure that projects funded by the GP Facility are designed on the 
basis of accurate and appropriate spatial and land use data and adhere 
to and reinforce existing national laws, regulations and Plans. The 
Participatory Land Use Planning Activity also will help strengthen the 
capacity of local communities and district level institutions to manage 
their own land and resources. Specifically, MCC Funding will support 
the procurement of firms or entities to undertake:
    (i) Administrative boundary setting, including (1) the location of 
major and minor settlements within villages, (2) the development of 
appropriate guidelines for participatory village boundary setting using 
established Government processes and international best practices, 
including meaningful involvement of women and disadvantaged groups, and 
(3) the mapping and demarcation of village boundaries in target 
subdistricts;
    (ii) The updating and integration of land and other natural 
resource uses, including (1) inventories of existing and pending 
licenses for land and natural resource use, other use rights, community 
claims, and select biophysical data, and (2) technical

[[Page 73704]]

assistance to relevant Government agencies to help integrate and 
administer spatial data, including data derived from (i) and (ii)(1), 
in order to improve their ability to conduct transparent licensing, 
determine the most effective land use and investments, and make the 
inventories widely available to the public; and
    (iii) The enhancement of district and provincial spatial plans, 
including reflection of the improved land and natural resource 
information contained in the land use inventory and boundary setting 
components above.
    (b) Technical Assistance and Oversight Activity.
    Technical assistance will be provided by contractors to the GP 
Facility Manager (defined below), district governments, project 
sponsors, community groups, and financial institutions in order to 
prepare low carbon development workplans, consisting of potential 
projects for funding by the GP Facility or other sources. The 
contractors shall facilitate the project identification process and 
help project sponsors prepare funding applications to be submitted to 
the GP Facility. Such technical assistance will include, as necessary, 
assistance with analysis, project preparation studies (e.g., 
feasibility studies, environmental and social assessments, gender 
assessments, economic analysis, and coordination with PLN and other 
agencies as necessary) and advice regarding compliance with the 
Investment Criteria (as defined in subsection (c) below). The GP 
Project identification and development process will involve significant 
stakeholder consultations, particularly with prospective project 
beneficiaries (including women and disadvantaged groups) and sponsors, 
to ensure that proposed projects are consistent with the Government's 
vision for community-led development and MCC's basic principle of 
supporting poverty alleviation through economic growth. Technical 
assistance also will extend to capacity-building necessary for 
implementation of proposed projects.
    Project sponsors under the Technical Assistance and Oversight 
Activity that received assistance with the preparation of proposals may 
submit those proposals for award consideration; however, investment 
support applications may also be submitted by candidates that have not 
received such assistance.
    (c) GP Facility Activity.
    The GP Facility Activity is designed to finance projects in the 
renewable energy and natural resources management sectors. MCA-
Indonesia, through one or more independent facility manager(s) (the 
``GP Facility Manager'') acceptable to MCC, shall implement the GP 
Facility. The GP Facility Manager will have an investment committee or 
the equivalent that will consist of representatives of the GP Facility 
Manager and MCA-Indonesia. MCA-Indonesia representatives shall include 
representatives of environmental and social specialists involved in 
overseeing the GP Project (ESMS disciplines (described below)).
    Unless the Parties otherwise agree, the GP Facility will contain 
two funding windows: (i) A window to finance commercial scale renewable 
energy investments reflecting the priority of the GP Project and 
private sector investments in natural resource management; and (ii) a 
grants window to support community-based, small scale renewable energy 
and other projects to promote sustainable natural resource management 
and improve land use practices.
    MCA-Indonesia shall develop detailed investment criteria, subject 
to MCC approval, governing the selection of projects to be financed 
under the GP Facility (the ``Investment Criteria''). The final 
Investment Criteria will be elaborated during the development of the 
Operations Manual (defined below).
    MCA-Indonesia shall develop an operations manual or manuals (the 
``Operations Manual'') in form and substance satisfactory to MCC, 
outlining the rules governing the financial and programmatic operation, 
including the Investment Criteria, of the GP Facility. The Operations 
Manual will outline monitoring and reporting procedures to ensure 
investment objectives are being achieved and to verify compliance with 
other relevant criteria, including environmental and social safeguard 
requirements. The Parties further agree that the GP Facility's 
financial controls will be subject to external audit.
    Proposals will be reviewed, ranked and recommended for approval in 
accordance with the Operations Manual. The Operations Manual shall 
contain project eligibility criteria reflecting: (i) A minimum economic 
rate of return (ERR) as defined by the MCC hurdle rate; (ii) a core 
objective of improving environmental stewardship (as reflecting best 
practices, and further detailed in Section 3 below); (iii) 
contribution, directly or indirectly, to the reduction of greenhouse 
gas emissions; (iv) equal access for women and other vulnerable groups 
to the project or its benefits; and (v) for commercially viable 
projects, suitable risk allocations to the parties. In addition, a set 
of sector-specific investment and eligibility criteria will be 
developed, including criteria for projects related to renewable energy, 
natural resource management, land use planning, agriculture, watershed 
management, forestry, and other livelihoods projects or sectors as 
agreed by the Parties.
    The GP Facility will be governed by and must adhere to rules and 
procedures documented in the Operations Manual. The capital investments 
made must be designed to be liquidated, whether by repurchase by the 
recipient, fulfillment of a note or contract, purchase by third 
parties, or in another manner, on terms appropriate for a capital 
investment including the size of planned liquidation payments, and as 
early as reasonably possible consistent with estimated cash flows of 
the activity in which the investment is made, all according to terms 
established at the time of the award and in adherence to the principles 
outlined in the Operations Manual. At the conclusion of the first year 
of the Compact Term, and annually thereafter, an assessment will be 
made and appropriate changes made, if necessary, in the structure and 
funding of the GP Facility, and the balance of renewable energy, 
natural resource management, and land use management and agricultural 
projects.
    Unless otherwise agreed by the Parties, prior to the end of the 
fourth year of the Compact Term, MCA-Indonesia and MCC will complete a 
plan for the disposition of financial assets generated by the GP 
Facility Activity. This plan must entail either a liquidation of assets 
or a program to be managed by a fiduciary agent. The selection of the 
liquidation agent or fiduciary agent must be completed no later than 
six months prior to the end of the Compact Term. No financial asset 
created under the GP Facility Activity during the Compact Term can have 
an original maturity that is later than the date that is nine years 
from the date of entry into force. All financial assets must be 
liquidated or transferred (as per the aforementioned plan) prior to the 
date that is ten years after the date of entry into force.
    (d) Green Knowledge Activity.
    The objective of this Activity is to build local, provincial, and 
national capacity to drive forward Indonesia's nation-wide low carbon 
development strategy within the context of the GP Project. 
Specifically, MCC Funding will support:
    (i) Capacity building for local and provincial stakeholders to 
stimulate a shift toward low carbon development

[[Page 73705]]

policies in local and provincial governments and to support the 
sustainability of MCC's investment in the GP Project. More 
specifically, supported activities include (1) capacity building for 
local government officials and representatives of civil society in low 
carbon development strategies, (2) capacity building in green products 
and green entrepreneurship for small and medium enterprises and 
cooperatives in local communities, and (3) community learning exchange 
programs on best GP Project practices.
    (ii) Development and improvement of centers of excellence in 
science and technology related to low carbon development at the 
regional and national level with an emphasis on renewable energy and 
closely related areas of natural resource management, and other related 
activities. More specifically, supported activities include (1) 
providing technical assistance to establish or strengthen academic 
programs and/or centers of excellence in renewable energy in qualified 
local or regional universities and polytechnic and other institutes, 
(2) providing technical assistance to establish a center of excellence 
in renewable energy at the national level, (3) providing technical 
assistance to conduct an assessment and review of the national 
renewable energy policy, and (4) providing technical assistance to 
revise and develop a renewable energy master plan.
    The implementation strategy of this Activity shall support the 
overall strategy and objectives of the GP Project. Further 
implementation details will be elaborated in the Operations Manual.

2. Beneficiaries

    The GP Project is expected to affect households and businesses in 
the targeted districts, primarily through expanded renewable energy and 
improved natural resource management and use. Improved natural resource 
use planning at district or provincial levels may also benefit other 
public or private users who are beyond the GP Project provinces or 
districts. The Green Knowledge Activity is expected to benefit 
businesses and households beyond the GP Project provinces or districts.

3. Environmental and Social Mitigation Measures

    The environmental screening category for the GP Project is Category 
D according to MCC Environmental Guidelines because the GP Facility 
will use MCC Funding to finance subprojects that may potentially result 
in adverse environmental and social impacts.
    To prevent or minimize potential adverse environmental and social 
impacts resulting from the GP Project investments, this Compact 
includes strict environmental and social safeguard requirements. An 
Environmental and Social Management System (``ESMS'') will be designed 
and established as part of the GP Facility Activity, and appropriately 
qualified environmental, social and gender specialists will be included 
within the staffing plans for MCA-Indonesia, consultancy agreements, 
and implementing entities to ensure proper execution and oversight of 
safeguard measures. The ESMS will incorporate IFC Performance 
Standards, the Government's Social and Gender Integration Plan, 
Indonesian legal requirements, the MCC Environmental Guidelines and the 
MCC Gender Policy. The ESMS also will incorporate international 
standards and best practices applicable to specific sectors and 
industries and important to protecting the rights and interests of 
local communities.
    Additional ESMS safeguard requirements are as follows: (a) 
Participation of local and national level environmental and social 
assessment and gender representative(s) on the Stakeholders Group; (b) 
establishment of environmental and social assessment (``ESA'') 
safeguard procedures at the district level; (c) a community-based ESA 
monitoring activity; (d) requirement for GP Project investments to have 
monitoring and evaluation indicators that address ESA issues, with 
relevant data to be gender-disaggregated; and (e) a requirement that 
project specific Environmental and Social Management Plans (ESMPs) be 
developed as part of the ESMS.

4. Donor Coordination

    Many donors are funding activities related to climate change, 
renewable energy and natural resources management in Indonesia. In 
order to coordinate those efforts, BAPPENAS chairs the Indonesia 
Climate Change Coordinating Forum consisting of the Asian Development 
Bank, the World Bank, USAID, Norway, Germany, Japan International 
Cooperation Agency, the Australian Agency for International Development 
(AusAID) and other donors. MCC has engaged with members of that Forum 
and has designed the GP Project with the Government to be a model that 
could be replicated by other donors in other provinces. Since the 
Government agreed to pursue a project in the green prosperity theme in 
July 2010, MCC has conducted extensive consultations with donors 
involved in low carbon development in Indonesia, including AusAID, 
Norway, Germany, the United Kingdom's Department for International 
Development, Asian Development Bank, United Nations Development 
Programme and World Bank. In addition, a number of international non-
governmental organizations (NGOs), notably those engaged in REDD+ 
readiness and REDD+ pilot projects in Indonesia, have provided their 
insights into working at the field level. The GP Project design 
incorporates key lessons learned from these donors' experiences, most 
notably the importance of focusing efforts at the district level and 
integrating low carbon activities in the planning phase and 
implementation phase within those districts. In addition, the GP 
Project builds on the extensive gains made by the Government, with 
support from international donors, in developing low carbon laws, 
regulations and plans and to assist in the decentralization effort. The 
GP Project's approach to spatial planning, technical assistance and 
funding facility creates a framework for collaboration in provinces and 
districts where there is geographical overlap with other donors.

5. USAID

    MCC has been in constant coordination with the United States Agency 
for International Development (``USAID'') to ensure that the GP Project 
complements other U.S. Government priorities including the Indonesia 
Clean Energy Development Project (ICED), the Indonesia Forest and 
Climate Support Project (IFACS), and Low Emission Development Strategy 
(LEDS). In addition, MCC will draw upon the work of a U.S. Government 
expert team consisting of the United States Forest Service (as the lead 
agency), the United States Geological Survey, and the National 
Aeronautics and Space Administration to jointly assess needs and 
develop a program of assistance to create a single authoritative map of 
Indonesia, starting with forestry and climate change that is consistent 
with the Geospatial Law of April 2011.

6. Sustainability

    The GP Project is supportive of the Government's ongoing 
decentralization efforts, and in particular will build capacity of 
local governments to ensure sustainable use of natural resources 
including activities funded under GP Project. In addition, activities 
funded under the GP Project will generate economic benefits for 
participants as an ongoing incentive for continued involvement in 
renewable energy

[[Page 73706]]

investment and sustainable natural resource management.

7. Policy, Legal and Regulatory Reforms

    The Parties agree that implementation by the Government of the 
policy, legal and regulatory reforms described below in items (a) 
through (d) are necessary to fully achieve the objectives of the GP 
Project:
    (a) The Government agrees that the Ministry of Energy and Mineral 
Resources (``ESDM''), in collaboration with stakeholders in the private 
sector and NGOs shall develop and adopt a feed-in-tariff (``FIT'') 
applicable to biomass, solar and other renewable energy projects (non-
hydro renewable energy projects). The FIT shall provide a reasonable 
incentive for independent power producers to develop and sell power to 
PLN. ESDM and PLN shall adopt and put in place any legal and 
institutional framework necessary to implement the FIT.
    (b) The Government agrees to the issuance of the relevant decrees/
regulations for the implementation of the Electricity Law of 2009 (Law 
30/2009) in order to create the conditions for assistance to any on-
grid renewable energy project.
    (c) PLN shall issue the following (i) standard, transparent 
procedures for structuring and executing transactions involving 
independent power producers, (ii) a standard bankable power purchase 
agreement for small-scale renewable power producers by technology type; 
and (iii) standardized application procedures for renewable energy 
project developers.
    (d) The Government shall consolidate the existing renewable energy 
master plans of PLN and the Directorate General of New Renewable Energy 
and Energy Conservation of ESDM into a single, national GIS-based 
database/inventory platform of (a) renewable energy resources, and (b) 
current and planned installation of renewable energy projects. The 
database shall have an initial focus on biomass, small hydropower with 
capacity of 0.5-10 MW, and solar power generation projects.
    In addition, the following shall constitute a condition precedent 
to initial Disbursement of the GP Facility:
    MCA-Indonesia shall have designed and established an ESMS 
consistent with the requirements of Section 3 of this Schedule, and 
reflected applicable requirements of this Schedule 1 in the Operations 
Manual.

Schedule 2 to Annex I--Community-Based Health and Nutrition to Reduce 
Stunting Project

    This Schedule 2 generally describes and summarizes the key elements 
of the project that the Parties intend to implement in furtherance of 
the Nutrition Objective (the ``Community-Based Nutrition Project'').

1. Summary of Project and Activities

    Over the past decade the Indonesian economy has experienced 
positive economic growth, witnessed large reductions in poverty, and 
has made continued progress towards many of its Millennium Development 
Goal targets for 2015. In spite of this progress, over 30 million 
Indonesians live below the poverty line (US$2 per day) and half of all 
households are clustered around the poverty line, which makes them 
highly vulnerable to income shocks. Of the poor, 65 percent currently 
live in rural areas. While Indonesia has already met and surpassed 
targeted reductions in the number of underweight children under five 
years old to below 18 percent and is on track to meeting its targets 
for reducing overall child mortality, other indicators of malnutrition 
should be considered. In particular, low height for age, more commonly 
known as stunting, reflects the cumulative effects of intergenerational 
poverty, poor maternal and early childhood nutrition and repeated 
childhood episodes of illness. It also reflects insufficient household 
purchasing power and poor access to education, housing, sanitation, and 
health services.
    After two years of age, the effects of early stunting are 
practically irreversible and have a life-long impact on an individual's 
cognitive development and productivity. Stunting is also largely 
accepted as one of the best predictors of future productivity, as 
stunted children are at a higher risk of experiencing chronic disease, 
delayed cognitive development, delayed enrollment in school, and 
reductions in academic achievement and future earning potential. 
Currently, it is estimated that 37 percent of children, or one out of 
every three children under five in Indonesia, is shorter than the 
standard height for their age.
    The objective of the Community-Based Nutrition Project is to reduce 
and prevent low birth weight and childhood stunting and malnourishment 
of children in project areas, and to increase household income through 
cost savings, productivity growth and higher lifetime earnings. An 
additional purpose of the Community-Based Nutrition Project is to 
determine the effectiveness of the use of MCC Funding in a multi-donor 
trust fund managed by a multilateral institution and its impact on 
poverty reduction.
    The Community Based-Nutrition Project builds on and utilizes a 
community engagement implementing mechanism of block grants already 
tested under a Ministry of Home Affairs (``MOHA'') community-driven 
development program pilot, Generasi (``Generasi''), implemented with 
assistance of the World Bank managed PNPM support fund (``PSF''). The 
Generasi pilot successfully supported communities in improving targeted 
health, nutrition and education indicators. As a condition to MCC 
Funding, Generasi community indicators will be revised and indicators 
for Service Providers (as defined below) added, to obtain stronger 
nutrition and stunting outcomes, and strengthen its focus on gender 
equality following an initial rigorous evaluation. This revised program 
is known as ``Generasi Plus.''
    In addition to enhanced training and capacity building, Generasi 
Plus will employ a series of social accountability and incentive 
mechanisms in order to ensure that healthcare and sanitation service 
providers at the district, sub-district and community levels (the 
``Service Providers'') provide adequate supplies and coverage of 
stunting prevention services to communities. These mechanisms 
constitute a ``supply-side'' strengthening approach to focus on 
preventing childhood stunting through enhanced maternal and child 
health services, nutrition and sanitation behavior change, shared 
parenting and nutrition education, and women's empowerment strategies.
    Except for the private sector response sub-activity outlined in 
subsection (b)(ii) below, Activities under the Community-Based 
Nutrition Project will be implemented by the PSF or a related mechanism 
acceptable to the Parties. MCA-Indonesia (or such other Government 
entity as may be agreed by the Parties) will execute a transfer 
agreement with the World Bank outlining the terms and conditions of 
MCA-Indonesia's funding of and participation in the PSF (the ``Transfer 
Agreement''). The Transfer Agreement will be consistent with this 
Compact and will be subject to MCC approval.
    The Community-Based Nutrition Project consists of the following 
three Activities:
     The financing of community block grants and participatory 
technical assistance to communities (the ``Community Projects 
Activity'');
     The financing of training to Service Providers, sanitation 
and hygiene

[[Page 73707]]

activities, provision of multiple micronutrient packets, materials to 
measure children's height, and other incentives, as well as private 
sector interventions (the ``Supply Side Activity''); and
     The financing of communications outreach, project 
management and monitoring and evaluation (the ``Communications, Project 
Management and Evaluation Activity'').
    (a) Community Projects Activity.
    MCC Funding will be included in the PSF funding to enhance the 
existing PNPM-Generasi implementation structure and activity components 
to provide block grants, participatory planning, and technical 
assistance to communities. The Activity is targeted at pregnant women, 
infants, and children under five (with a particular focus on children 
under two), and primary and junior high school-aged children.
    Villages participating in Generasi Plus commit to improving twelve 
basic health and education indicators through block grants of an 
average size determined by the Government on an annual basis. Under 
Generasi Plus, stunting indicators (including a measure of children's 
height for age) will be added to the existing twelve indicators. The 
sub-district allocates the grant among villages based on the numbers of 
pregnant women, infants, and children under five (with a particular 
focus on children under two), and primary and junior high school-aged 
children. Both newly recruited and existing facilitators, including 
those trained specifically in nutrition and stunting interventions 
under the ``Training and Advocacy Sub-Activity'' in subsection (b)(i) 
below, will work with Service Providers to assist villagers in a 
participatory planning process, helping them identify problems and find 
local solutions to be funded using the block grant. In this regard, 
there is an ``open menu'' of options for the villages to choose from, 
and Generasi Plus will encourage innovation in addressing nutrition and 
stunting outcomes. In order to focus communities on the most beneficial 
interventions, the Government bases the size of the villages' Generasi 
block grant for the subsequent year partly on their performance on each 
of the targeted health and education indicators modified to include 
stunting indicators under Generasi Plus.
    (b) Supply-side Interventions Activity.
    (i) Training and Advocacy Sub-Activity.
    MCC Funding will support the creation of an enhanced training 
program to all Service Providers in the designated project areas, as 
well as enhanced training for facilitators (the ``Training Program''). 
With respect to the facilitators, the purpose of the Training Program 
is to redirect the choice of activities to be financed under the 
Community Projects Activity to encourage a focus on stunting reduction 
and related interventions such as feeding practices, training regarding 
height and weight measurement, diet quality and micronutrients, and 
sanitation behavior change. The Training Program is also aimed at 
strengthening women's empowerment and increasing fathers' role in 
health interventions for target beneficiaries. With respect to the 
Service Providers, the purpose of the Training Program is to improve 
the quality and access of services in the areas of nutrition and 
sanitation. Specifically, MCC Funding will be used to:
     Develop technical and advocacy materials for the Training 
Program;
     Deploy the Training Program to Service Providers, 
community facilitators, and targeted beneficiaries at provincial, 
district and sub-district levels of government;
     Provide comprehensive train-the-trainer programming to 
Service Providers; and
     Provide and distribute the multiple micronutrient packets 
and height measurement equipment to communities through health centers 
for the first two years of implementation.
    MCC Funding also will be used to provide incentives to the Service 
Providers based on their service delivery performance. Prior to the 
initial Disbursement of MCC Funding to the PSF, a manual, satisfactory 
to MCC, will be developed outlining the mechanisms for delivery of 
incentives to Service Providers, the types of incentives that will be 
tested and made available to Service Providers, and the performance 
criteria for receiving incentives. The manual also will outline Service 
Providers' ability to access additional incentives through Generasi 
Plus, which will be linked to (1) the community receiving that service, 
and (2) the quality of the service being received, and describe how the 
various incentives to be tested will be monitored.
    (ii) Private Sector Response Sub-Activity.
    MCC Funding will be used by the Government, through MCA-Indonesia, 
to make one or more grants for the purpose of leveraging private sector 
responses to community and family needs for improved mothers' and 
infants' nutrition and community sanitation. By stimulating market-
based responses to identified demand for nutrition and sanitation 
interventions, this sub-activity is intended to support sustainable 
impacts beyond the Compact Term.
    (c) Communications, Project Management and Evaluation Activity.
    With respect to the Communications, Project Management and 
Evaluation Activity, MCC Funding will be used to:
     Develop and implement a national stunting awareness 
campaign, including a focus on healthy families that emphasizes shared 
decision making between women and men within the household;
     Finance the management costs associated with all three 
Activities within the Community-Based Nutrition Project; and
     Design and implement a rigorous impact evaluation as 
further described in Annex III.

2. Beneficiaries

    The Community-Based Nutrition Project is expected to benefit up to 
2.9 million children in up to 7,000 villages, and to generate 
additional income and cost savings that benefit their entire families 
in the provinces of West Java, East Java, Nusa Tenggara Timur (NTT), 
Nusa Tenggara Barat (NTB), Gorontalo and West Sulawesi.

3. Environmental and Social Mitigation Measures

    The environmental screening category for the Community-Based 
Nutrition Project is Category D according to MCC Environmental 
Guidelines, as it will involve an intermediate funding facility that 
will use MCC Funding to finance subprojects that may result in adverse 
environmental and social impacts. The majority of PNPM Generasi 
investments involve non-infrastructure-based investments that would not 
be expected to result in significant environmental, health, or safety 
(``EHS'') hazards.
    MCA-Indonesia will be required to develop and implement an EMS that 
is consistent with the IFC Performance Standards and the MCC Gender 
Policy, and that meets MCC and Government regulatory requirements for 
the Community-Based Nutrition Project. The EMS will leverage existing 
safeguard systems in place and be scaled appropriately, as well as 
capitalize on opportunities to contribute towards environmental and 
socially sustainable development and increased gender equality.

4. Donor Coordination

    The Community-Based Nutrition Project has been designed to align to 
the PSF structure in part to be reflective of the Jakarta Commitment: 
Aid for Development Effectiveness of 12 January

[[Page 73708]]

2009 and MCC's own principles of aid effectiveness, including 
harmonization of donor efforts. The PSF is a mechanism established by 
the Government and donors to provide support to the Government through 
coordinated technical assistance, planning advice, dialogue, and 
targeted financial assistance. The Community-Based Nutrition Project is 
also aligned with the U.S. Department of State's 1,000 Days Partnership 
and Scaling Up Nutrition (``SUN''). SUN promotes targeted action and 
investment to improve nutrition for mothers and children in the 1,000 
day period from pregnancy to age two, when better nutrition can have a 
life-changing impact on a child's future.

5. USAID

    While the Community-based Nutrition Project is the first U.S. 
Government assistance to specifically tackle the issue of stunting, 
USAID has significant experience with sanitation and hygiene behavioral 
change interventions in Indonesia. USAID also has some recent 
experience with a maternal health project, which targets increased 
availability of emergency medical care and preventive measures for 
pregnant women in West Java, including improved maternal nutrition. 
During the Compact development process, significant efforts were made 
to ensure that the MCC-funded activities and those of the USAID mission 
and other U.S. Government actors were closely coordinated. Ongoing 
review and coordination, as appropriate, will be integrated into 
implementation plans as they are finalized.

6. Sustainability

    The Community-Based Nutrition Project is designed to improve 
chances for replication and sustainability. First, Generasi Plus 
attempts to coordinate and align MOHA and Ministry of Health (``MOH'') 
objectives. Aligning MOHA and MOH will allow future partnering as 
Generasi continues expansion. In addition, Generasi Plus successes will 
allow the MOH to focus on those roles best undertaken by it (e.g., 
provision of nutrition and sanitation services provision), while 
allowing MOHA and PSF to assist in ensuring that communities understand 
and have demand for these services.

7. Policy, Legal and Regulatory Reforms

    Prior to the Compact's entry into force, the Government will ensure 
either: (a) That the PSF is extended through the end of the Compact 
Term; or (b) the Government will provide an alternative implementation 
structure acceptable to MCC, together with a timeline for transition of 
the management of the Project.

Schedule 3 to Annex I--Procurement Modernization Project

    This Schedule 3 generally describes and summarizes the key elements 
of the project that the Parties intend to implement in furtherance of 
the Procurement Modernization Objective (the ``Procurement 
Modernization Project'').

1. Summary of Project and Activities

    The Procurement Modernization Project is designed to accelerate the 
Government's procurement reform agenda and transform operation of the 
public procurement system in Indonesia. The objective of the project is 
to achieve cost and efficiency savings on procured goods and services, 
while assuring their quality satisfies the public need, and to achieve 
the delivery of public services as planned. These savings should lead 
to greater provision of goods and services to the economy which will 
positively impact economic growth.
    The Procurement Modernization Project will be implemented, through 
MCA-Indonesia, by the National Public Procurement Agency (``LKPP''). 
Reflecting the multifaceted nature of a public procurement system, the 
Procurement Modernization Project will support two Activities:
     Improving the procurement function by increasing the 
capacity and professionalization of the procurement function (the 
``Procurement Professionalization Activity''); and
     Supporting the development of procurement policies and 
procedures which would improve procurement outcomes, the rate and 
success of public private partnerships (``PPPs''), and environmental 
sustainability (the ``Policy and Procedure Activity'').
    Along with the implementation of these Activities, the Procurement 
Modernization Project will work to strengthen LKPP's capacity to 
integrate gender concerns into the procurement realm.
    The Institutional Structure and Professionalization of PSUs Sub-
Activity (described in subsection (a)(i) below), a central component of 
the Procurement Modernization Project, will be conducted in two phases. 
The first phase, which is expected to encompass years one to three of 
the Compact Term, will entail support to a subset of up to thirty 
demonstration procurement service units (``PSUs'') in order to better 
understand the most effective approach given different procurement 
contexts (``Phase One''). The second phase, which is expected to last 
for the balance of the Compact Term, will entail a scaling up of Phase 
One and an adjustment in design, if necessary, to yield the best 
results for the Project (``Phase Two''). MCC's decision to initiate 
Phase Two is subject to satisfaction of: (a) The achievement of an 
estimated economic rate of return for Phase Two that is above the MCC-
defined hurdle rate; (b) the conclusion of an Assessment (as defined 
below) of Phase One; (c) the achievement of legal and policy changes as 
set forth in Section 7(a) below of this Schedule 3 and as may otherwise 
be required for the success of Phase Two; and (d) agreement between the 
Parties regarding the final design of Phase Two taking into account the 
Assessment and other relevant factors as may be necessary. In the event 
that MCC determines, in its sole discretion, that Phase One fails to 
achieve the performance criteria outlined above, the MCC Funding 
associated with Phase Two may be reallocated to other Activities, 
consistent with Section 6.2(b) of this Compact.
    Prior to commencement of Phase One, the regulatory framework and 
level of authority for PSUs and their staff will be documented. During 
Phase One, MCC Funding will be used to help identify the appropriate 
mix of reforms for a given administrative level (i.e., kota, kabupaten, 
province, or national level) when considering characteristics such as 
size of procurement flows, the capacity to operate and manage 
procurement systems developed through the Compact, and information 
technology capacity. During Phase One, the Government will ensure that 
the demonstration PSUs comply with the regulatory framework set forth 
in Perpres 54/2010.
    Prior to the conclusion of Phase One, the Government, through MCA-
Indonesia, will ensure an independent program assessment of the 
performance of the Project during Phase One (the ``Assessment''). The 
design and scope of the Assessment and its application of its results 
to Phase Two will be specified in the PIA. The Government will ensure 
access to recent and current procurement data, whether in electronic or 
hard copy form, that is needed to carry out the Assessment. In the 
event MCC agrees to proceed with Phase Two, the Assessment of Phase 
One, together with other data and factors as may be necessary, will 
inform any necessary modifications to the design of Phase Two.
    (a) Procurement Professionalization Activity.

[[Page 73709]]

    In most well-functioning public procurement systems, procurement is 
a specialized function that protects financial resources and 
contributes significantly to the effective and efficient operation of 
the procuring organization. Within the Government, procurement is not a 
well-established function in the civil service.
    Professionalization changes the workforce, is a key element to 
changing incentives in the procurement system and may create a firewall 
against corruption. Additional measures, including more effective ex 
post controls (including procurement and financial audits, and 
databases of procurement system performance) are also needed to ensure 
improved institutional performance.
    The Government has required the formation of PSUs at national and 
local levels to serve as permanent, independent structures where 
procurement professionals will provide a centralized procurement 
service. While approximately 150 PSUs have been newly established, most 
have not met the requirements of a modernized procurement function, and 
questions remain about how to organize and define the roles and 
responsibilities of the PSUs within the structure of the spending unit.
    The most important and most difficult next steps in the procurement 
reform agenda for Indonesia are to build this professional workforce, 
create an institutionalized role and structure that provides sufficient 
authority to implement good practice, and to provide a career path to 
incentivize adherence to best practice, while also strengthening 
efficiency tools and controls. To this end, the Procurement 
Modernization Project will implement the following mutually reinforcing 
sub-activities.
    (i) Institutional Structure and Professionalization of PSUs Sub-
Activity.
    MCC Funding will support existing PSUs at the various levels of 
government to create models in diverse settings and circumstances. 
Specifically, MCC Funding will be used to:
    (A) Determine standard staffing needs and strengthen operational 
modalities of PSUs;
    (B) Engage designated PSUs in implementing the Activities described 
in this Procurement Modernization Project, as appropriate, to establish 
their feasibility and local good practices;
    (C) Support LKPP's human resource development strategy, by 
establishing a curriculum, recognizing training institutes through an 
accreditation process, and training procurement officers to the 
requisite level of professional knowledge, skill and attitudes, 
including development of a mentoring program and introductory, 
intermediate and advanced training courses with competency-based 
certification. In the process of development and delivery of the course 
program, the Procurement Modernization Project will develop procurement 
trainers, and course materials, including e-learning modules, and will 
strengthen training institutes that will be able to continue to build 
and sustain the professional procurement workforce; and
    (D) Support development of training modules, in consultation with 
the National Audit Board (``BPKP''), to develop competencies among the 
Government's auditors (inspectors general) to conduct compliance and 
performance audits of the procurement system.
    During Phase One, up to 30 PSUs will be targeted under this sub-
activity. The successful models developed in Phase One would then be 
rolled out to a larger set of existing or newly created PSUs under 
Phase Two, with a target to create a workforce of 500 procurement 
professionals working in permanent, fulltime positions in established 
PSUs. It is estimated that this newly trained workforce would provide 
permanent staffing needs for at least 100 PSUs but total staffing needs 
of model PSUs will be discovered during the demonstration phase of the 
project.
    (ii) Procurement Management Information System Sub-Activity.
    Information technology applications can provide procurement 
professionals with modern tools to perform their functions 
professionally and efficiently and can strengthen controls in the 
procurement process. Accordingly, MCC Funding will support:
    (A) Development of an information technology system to create a 
data warehouse to maintain complete records of procurement activity;
    (B) Testing of a procurement module at pilot sites; and
    (C) Establishment of and capacity building regarding a catalog 
purchasing system, commonly known as an e-catalog system, to ease the 
administrative burden and transaction costs related to the purchasing 
of routine commercial products and services, together with the 
development of the procurement procedures and standard bidding 
documents for framework contracting.
    (b) Policy and Procedure Development Activity.
    This Activity consists of two sub-activities that together address 
major gaps in the procedural framework and operation of the procurement 
system in Indonesia.
    (i) Competitive Tendering for PPPs Sub-Activity.
    MCC Funding will be used to support:
    (A) Preparation of guidelines and standard bidding documents for 
competitive tendering of PPP projects and development of a practical 
toolkit with templates and model documents for procurement planning and 
project preparation;
    (B) A pilot program to demonstrate and finalize the Procurement 
Modernization Project in the context of tendering a PPP infrastructure 
project in at least one line ministry and a selected number of 
interested sub-national administrations, such as water utilities; and
    (C) Implementation of recommended adjustments, as necessary or 
appropriate, of the e-procurement system and a PPP project management 
system.
    (ii) Procedures for Sustainable Procurement Sub-Activity.
    The Government should have sustainable procurement procedures when 
it acts as a consumer. The impact promises to be significant as the 
Government is the largest consumer in Indonesia and controls the 
spending of a large percentage of Gross Domestic Product (GDP). 
Moreover, the Government public procurement policy, like every national 
public procurement system, is a major driver of change throughout 
society. In furtherance of the commitment to sustainable procurement 
stipulated in Perpres 54/2010, MCC Funding will be used to support the 
development of processes and procedures to actualize this commitment. 
Developing the sustainable procurement framework will be implemented in 
three stages: A discovery stage, an establishment stage, and an 
implementation stage leading to a pilot program. MCC and the Government 
will evaluate this sub-activity's performance at the end of each stage 
and will move forward with the next stage only upon mutual consent.

2. Beneficiaries

    Modernization of the Government's public procurement system will 
benefit citizens that reside in the districts, provinces, or cities 
which MCC targets through the PSU reforms.
    The Procurement Modernization Project will support the 
institutional reform in PSUs established in local and central 
government spending units with a target goal of building a core of 500 
procurement professionals. It is estimated that this newly trained

[[Page 73710]]

workforce would provide permanent staffing needs for at least 100 PSUs, 
but total staffing needs of model PSUs will be discovered during the 
demonstration phase of the project.

3. Environmental and Social Mitigation Measures

    The nature of the Activities under the Procurement Modernization 
Project is such that they are unlikely to cause direct EHS hazards 
because they involve institutional capacity-building, and policies and 
procedures development.
    The Competitive Tendering for PPPs sub-activity described in 
Section 1(b)(i) of this Schedule 3 involves policy and procedure 
development so that the Government can increase the efficiency of PPPs, 
further encourage private-sector investment, and improve government 
infrastructure investment. A critical component of PPP policy 
development will be ensuring that investors are aware of Government 
regulation concerning environmental, health, and safety hazards and 
that PPP activity meets legal requirements and strengthens the current 
system of incorporating ESA safeguards. MCA-Indonesia Activities are 
expected to include ensuring that environmental and social safeguards 
are addressed in standard bidding documents, developing PPP pre-award 
review procedures that include Ministry of the Environment, Ministry of 
Forestry, and other stakeholders, and strengthening the Environmental 
Impact Assessment (AMDAL) review procedure. Additionally, any training 
that is developed to roll out the revised PPP policies and procedures 
must also include curriculum on environmental and social safeguards. 
Key environmental and social issues with respect to PPPs may include 
the following: Labor and working conditions, community health and 
safety, involuntary resettlement and land acquisition, biodiversity and 
natural resource management, indigenous peoples, free prior and 
informed consent, and pollution prevention and abatement, among others.
    The Sustainable Procurement sub-activity described in Section 
1(b)(ii) of this Schedule 3 represents an opportunity to assist 
Government with its desire for environmentally sustainable growth that 
is outlined in the Asian Development Bank's ``Indonesia Critical 
Development Constraints'' analysis. Through policy development and a 
pilot program, LKPP will be able to determine how a sustainable 
procurement framework can be successfully scaled up. This activity will 
require that a proper certification and verification system for 
sustainably-sourced materials is in place to avoid incidents of ``green 
washing'' and further reduce EHS risk. Given the complexity of the 
Government's decentralized government, overlapping ESA legal framework, 
and large number of NGOs and advocacy groups with an interest in 
sustainability in Indonesia, it will be important that the Sustainable 
Procurement activity thoroughly consult a broad-range of stakeholders 
to ensure that policies and procedures are consistent with the state-
of-the-art understanding and accepted by entities and organizations 
that will advocate for their use. It is also important that the PPP 
policies and procedures are well-coordinated with the Sustainable 
Procurement sub-activity to ensure that they are mutually reinforcing 
and do not jeopardize each other's success (e.g., PPP procedures enable 
unsustainable timber extraction and Sustainable Procurement sub-
activity promotes harvesting from sustainably managed forests).

4. Donor Coordination

    LKPP has received support from several donors for its institutional 
strengthening efforts, including AusAid, the World Bank, and the Asian 
Development Bank. MCC has coordinated with these donors on technical 
and implementation strategy issues over the course of project 
development. Based on these discussions, AusAid has decided to extend 
its technical assistance program (``ISP3'') which was set to be 
completed in 2011, by one additional year. The ISP3 project has 
assisted LKPP to develop the strategies for human resource development 
and to organize PSUs that MCC is working to implement. The Asian 
Development Bank and the World Bank continue to provide various 
technical support programs and technical assistance to develop standard 
bidding documents. MCC plans to continue close collaboration with 
donors during the Compact implementation process and will continue to 
participate in the donor forum related to procurement.

5. USAID

    Through the Indonesia Threshold Program, MCC has been at the 
forefront of supporting LKPP's efforts to bring more modern procurement 
practices to Indonesia. USAID served as the implementer of MCC's 
Indonesia Threshold Program, which supported expansion of LKPP's 
electronic procurement system (LPSEs) through the establishment of five 
regional procurement centers. The Procurement Modernization Project 
presents a unique opportunity for MCC and USAID to build on some of 
those early successes and work together on public procurement reform 
efforts throughout Compact implementation.

6. Sustainability

    The Procurement Modernization Project focuses on building 
sustainable institutions and policies to achieve improved, long-term 
public procurement practices in Indonesia by ensuring greater 
transparency, accountability, and delivery of better value goods and 
services for money. While the capacity development program invests in 
individuals, it is designed to be implemented in a manner that builds 
training institutions equipped with the resources to expand and 
continually maintain the procurement workforce. The PSUs to be piloted 
are intended as case studies providing lessons-learned and best 
practices as models for establishing such units throughout the country.

7. Policy, Legal and Regulatory Reforms

    (a) As a condition to the commencement of Phase Two, the Government 
shall have established procurement as a functional profession in the 
civil service with a defined career path.
    (b) The Government will identify the policy, legal and regulatory 
reforms needed to effectively competitive tender PPP projects.
    (c) The Government will further any necessary policy, legal, and 
regulatory reforms to encourage the purchase of green goods and 
services within the public procurement sector.

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 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.

[[Page 73711]]



                                                    Exhibit A--Multi-Year Financial Plan Summary (US)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                       COMPONENT                             CIF         Year 1        Year 2        Year 3        Year 4        Year 5         Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      1. GP PROJECT
--------------------------------------------------------------------------------------------------------------------------------------------------------
(a) Participatory Land Use Planning Activity..........    $3,000,000    $8,000,000    $5,000,000    $4,000,000    $3,000,000    $2,000,000   $25,000,000
(b) Technical Assistance and Oversight Activity.......       850,000    10,350,000    10,200,000     9,700,000     9,700,000     9,200,000    50,000,000
(c) GP Facility Activity..............................       500,000    46,000,000    50,000,000    48,650,000    48,850,000    48,500,000   242,500,000
(d) Green Knowledge Activity..........................             0     3,460,000     2,960,000     2,960,000     2,960,000     2,660,000    15,000,000
                                                       -------------------------------------------------------------------------------------------------
    Subtotal..........................................     4,350,000    67,810,000    68,160,000    65,310,000    64,510,000    62,360,000   332,500,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          2. COMMUNITY-BASED NUTRITION PROJECT
--------------------------------------------------------------------------------------------------------------------------------------------------------
(a) Community Projects Activity.......................             0    10,584,000    13,608,000    16,632,000    19,656,000    21,168,000    81,648,000
(b) Supply-Side Activity..............................     1,000,000     7,177,798     7,893,096     6,315,052     8,887,008     4,658,057    35,931,011
(c) Communications, Project Management and Evaluations             0     4,459,326     3,081,077     3,001,294     1,648,011     1,731,281    13,920,989
 Activity.............................................
                                                       -------------------------------------------------------------------------------------------------
    Subtotal..........................................     1,000,000    22,221,124    24,582,173    25,948,346    30,191,019    27,557,338   131,500,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          3. PROCUREMENT MODERNIZATION PROJECT
--------------------------------------------------------------------------------------------------------------------------------------------------------
(a) Procurement Professionalization Activity..........     1,750,000     6,750,000     6,750,000     7,055,250    15,000,000     9,101,750    46,407,000
(b) Policy and Procedure Activity.....................             0       898,250       898,250       898,250       898,250             0     3,593,000
                                                       -------------------------------------------------------------------------------------------------
    Subtotal..........................................     1,750,000     7,648,250     7,648,250     7,953,500    15,898,250     9,101,750    50,000,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              4. MONITORING AND EVALUATION
--------------------------------------------------------------------------------------------------------------------------------------------------------
Monitoring and Evaluation (M&E) Activity..............       200,000     1,500,000     2,000,000     1,000,000     2,500,000     3,000,000    10,200,000
    Subtotal..........................................       200,000     1,500,000     2,000,000     1,000,000     2,500,000     3,000,000    10,200,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          5. PROGRAM ADMINISTRATION AND CONTROL
--------------------------------------------------------------------------------------------------------------------------------------------------------
(a) Program Administration............................     1,000,000     9,200,000     9,700,000     9,700,000     9,100,000    10,800,000    49,500,000
(b) Fiscal Management.................................     1,800,000     1,800,000     1,800,000     1,800,000     1,800,000     1,800,000    10,800,000
(c) Procurement Management............................     1,800,000     1,800,000     1,500,000     1,500,000     1,200,000     1,200,000     9,000,000
(d) Audit.............................................             0       300,000       300,000       300,000       300,000       300,000     1,500,000
(e) Targeted Gender Activities........................       100,000       800,000     1,200,000     1,200,000     1,200,000       500,000     5,000,000
                                                       -------------------------------------------------------------------------------------------------
    Subtotal..........................................     4,700,000    13,900,000    14,500,000    14,500,000    13,600,000    14,600,000    75,800,000
                                                       -------------------------------------------------------------------------------------------------
        Total Compact Budget..........................    12,000,000   113,079,374   116,890,423   114,711,846   126,699,269   116,619,088   600,000,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

Annex III Description of Monitoring and Evaluation Plan

    This Annex III 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 MCC's Policy for Monitoring and Evaluation of Compacts 
and Threshold Programs posted from time to time on the MCC Web site 
(the ``MCC Policy for Monitoring and Evaluation of Compacts and 
Threshold Programs''). The M&E Plan may be modified as outlined in MCC 
Policy for Monitoring and Evaluation of Compacts and Threshold Programs 
with MCC approval without requiring an amendment to this Annex III.

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 and Project 
Objectives will be monitored (``Monitoring Component''); (b) a process 
and timeline for the monitoring of planned, ongoing, or completed 
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 MCC, MCA-Indonesia and 
elsewhere.
    In addition, data and empirical findings obtained through the M&E 
Plan, including through Impact Evaluations (as defined below), will be 
used to calculate or recalculate the projected and ex post ERRs for the 
Projects and Activities as appropriate and in accordance with MCC's 
Guidance on Economic Analysis, in order to assess whether Projects and 
Activities continue to meet the MCC-defined hurdle rate. MCC may elect 
to use what it deems to be the most relevant and appropriate economic 
model, and may apply the evidence it deems most convincing in 
connection with that model, but will consult with MCA-Indonesia and 
other relevant experts in weighing and contextualizing

[[Page 73712]]

such evidence. MCC may elect to reduce or eliminate the scope or 
Compact budget for any Projects, Activities, or sub-activities should 
their respective ERRs fall below the hurdle rate. Further detail 
regarding the method by which the ERRs will be calculated for projects 
financed with funding from the GP Facility will be provided in the 
Program Implementation Agreement.
    MCC and the Government may also agree to refinements to the program 
logic, specific program elements, and detailed design of projects and 
activities to support a higher projected ERR and improved realization 
of the intended Goal or Objectives of this Compact based upon 
additional data, preliminary or interim monitoring and evaluation 
findings, and/or an improved understanding of the causes of and most 
promising solutions to the constraints to economic growth addressed in 
this Compact, including social and gender, policy, regulatory, and 
other issues, both prior to and after entry into force of this Compact.

2. Program Logic

    The M&E Plan will be built on a logic model which illustrates how 
the Program, Projects and Activities contribute to the Compact Goal and 
the Project Objectives.
    (a) The objective of the Community-Based Nutrition Project is to 
reduce and prevent low birth weight, childhood stunting and 
malnourishment of children in project areas. This will lead to an 
increase household incomes through cost savings, increases in 
productivity and higher lifetime earnings;
    (b) The objectives of the GP Project are to (i) increase 
productivity and reduce reliance on fossil fuels by expanding renewable 
energy; and (ii) increase productivity and reduce land-based greenhouse 
gas emissions by improving land use practices and management of natural 
resources. These objectives support low carbon economic development and 
the protection of natural capital that will lead to increased household 
incomes in project areas; and
    (c) The objectives of the Procurement Modernization Project are to 
(i) achieve significant government expenditure savings on procured 
goods and services; and to (ii) improve the delivery of public services 
through expenditure of planned budgets.

3. Monitoring Component

    To monitor progress toward the achievement of the impact and 
outcomes of the Compact, the Monitoring Component of the M&E Plan will 
identify: (i) The Indicators (as defined below), (ii) the definitions 
of the Indicators, (iii) the sources and methods for data collection, 
(iv) the frequency for data collection, (v) the party or parties 
responsible for collecting and analyzing relevant data, and (vi) 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 Project Objective during the Compact Term. MCC also intends to 
continue monitoring and evaluating the long-term impacts of the Compact 
after Compact expiration. 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''). The Government 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 based on a logical framework approach that classifies 
indicators as goal, objective, outcome, and output. The Compact Goal 
indicators (``Goal Indicators'') will measure the poverty reduction 
goal for each Project. Second, the Objective Indicator (``Project 
Objective Indicators'') will measure the final result of each Project. 
Third, Output and Outcome Indicators (``Project Outcome Indicators'') 
will measure the early and intermediate results of the Project 
activities. For each Project Outcome Indicator, Project Objective 
Indicator, and Goal Indicator, the M&E Plan will define a strategy for 
obtaining and verifying the value of the Baselines. 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-Indonesia 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 and based on national statistics. The 
Program will contribute to progress against poverty nationwide and the 
reduction of carbon emissions in Project areas, but the results are 
attributable to many factors in the economy:
    (A) Increased incomes of households in Project areas.\1\
---------------------------------------------------------------------------

    \1\ This applies to both the Community-Based Nutrition and Green 
Prosperity projects.
---------------------------------------------------------------------------

    (B) Increased efficiency and quality in the expenditure of public 
funds.
    (2) Objective and Outcome Indicators. The M&E Plan will contain the 
Indicators listed in the following tables. Prior to entry into force, 
all Baseline and Targets will be assessed and modified by the Parties 
as Project sites, Activity details, and new Baseline data become 
available. Minimum Targets will be identified and this Annex III will 
be modified accordingly, prior to entry into force. In addition, the 
M&E Plan will be amended to reflect the addition of such indicators. 
MCC common Indicators relevant to the Projects will also be included.

                                   Table 1--Community-Based Nutrition Project
----------------------------------------------------------------------------------------------------------------
                                                                           Unit of                      Year 5
            Result                  Indicator          Definition        measurement      Baseline      target
----------------------------------------------------------------------------------------------------------------
                                            Objective Level Indicator
----------------------------------------------------------------------------------------------------------------
Reduce and prevent low birth    Reduction in       Decrease in        Percent.........  TBD........  -20
 weight, childhood stunting      stunting.          stunting rates
 and malnourishment of                              among children
 children in project areas.                         in project areas.

[[Page 73713]]

 
                                Reduction in low   Decreased          Percent.........  TBD........  -21
                                 birth weight.      percentage of
                                                    children born
                                                    under 2500 grams
                                                    in project areas.
----------------------------------------------------------------------------------------------------------------
                                             Outcome Indicators \2\
----------------------------------------------------------------------------------------------------------------
Improved healthcare delivery..  Increase in        Pregnant mothers   Percentage point  TBD........  +10
                                 prenatal care      examined by a
                                 visits.            midwife at least
                                                    4 times during
                                                    pregnancy.
                               ---------------------------------------------------------------------------------
                                Increase in        Deliveries         Percentage point  TBD........  +10
                                 assisted           assisted by
                                 deliveries.        trained health
                                                    workers.
                               ---------------------------------------------------------------------------------
                                Increased          Each pregnant      Percent.........  TBD........  +10
                                 distribution of    woman receives a
                                 iron supplements.  minimum of 90
                                                    iron pills
                                                    during her
                                                    pregnancy.
                               ---------------------------------------------------------------------------------
                                Increased          Each baby from 6   Percent.........  TBD........  TBD
                                 distribution of    to 59 months
                                 Vitamin A          receives Vitamin
                                 supplements.       A, twice a year.
                               ---------------------------------------------------------------------------------
                                Increase in        Each mother and    Percent.........  TBD........  TBD
                                 postnatal          baby receive
                                 treatment          postnatal
                                 provided.          treatment from a
                                                    midwife or a
                                                    doctor, at least
                                                    twice within 40
                                                    days of delivery.
                               ---------------------------------------------------------------------------------
                                Increased number   Each children      percent.........  0..........  80
                                 of children        below two year
                                 measured.          measured
                                                    routinely.
                               ---------------------------------------------------------------------------------
                                Regular monthly    Regular weighing   Percent.........  TBD........  TBD
                                 weighing           for under-five.
                                 increases.
                               ---------------------------------------------------------------------------------
                                Increased          Immunization       Percentage point  TBD........  +10
                                 immunization       coverage for 12-
                                 coverage.          23 months old in
                                                    target areas.
----------------------------------------------------------------------------------------------------------------


                                      Table 2--Green Prosperity Project \3\
----------------------------------------------------------------------------------------------------------------
                                                                           Unit of                      Year 5
            Result                  Indicator          Definition        measurement      Baseline      target
----------------------------------------------------------------------------------------------------------------
                                                 Objective Level
----------------------------------------------------------------------------------------------------------------
Expand renewable energy to      Number of          Percentage of      Percent.........  TBD \6\....  TBD
 increase productivity and       households \4\     households
 reduce reliance on fossil       electrified        electrified by
 fuels.                          disaggregated by   renewable energy
                                 administrative     sources in
                                 level.             targeted sub-
                                .................   districts and
                                                    districts \5\ as
                                                    a result of
                                                    projects.
                                                  --------------------------------------------------------------
                                                   Percentage of      Percent.........  TBD........  TBD
                                                    households
                                                    electrified in
                                                    villages.
                               ---------------------------------------------------------------------------------
                                Increased          [Renewable energy  Percent.........  TBD........  TBD
                                 percentage of on   source/fossil
                                 grid/off grid      fuel-supplied
                                 renewable energy   power plants and
                                 vis a vis fossil   renewable energy
                                 fuel-generated     source] * 100.
                                 power.
                               ---------------------------------------------------------------------------------
Improve land use practices and  Increased          On farm            Agricultural      TBD........  TBD
 management of natural           agricultural       productivity       yield/hectare.
 resources to increase           productivity.      increases on
 productivity and reduce land-                      existing
 based greenhouse gas                               agriculture and
 emissions.                                         degraded lands,
                                                    to be
                                                    disaggregated by
                                                    commodity.
----------------------------------------------------------------------------------------------------------------
                                               Outcome Indicators
----------------------------------------------------------------------------------------------------------------
Improved land use practices     Number of loan     Number of          Number..........  TBD........  TBD
 and management of natural       borrowers.         borrowers
 resources to increase                              (primary sector
 productivity of land.                              producers, rural
                                                    entrepreneurs,
                                                    and
                                                    associations)
                                                    who access loans
                                                    for on-farm, off-
                                                    farm, and rural
                                                    investment.
                               ---------------------------------------------------------------------------------

[[Page 73714]]

 
                                Improved           Improved water     Total Suspended   TBD........  TBD
                                 watershed          quality as         Solids.
                                 management.        measured by
                                                    reduced water
                                                    turbidity.
----------------------------------------------------------------------------------------------------------------
Maintaining or improving        Density of forest  CO2 capture        Ha..............  TBD........  TBD
 carbon sinks (i.e. carbon       cover maintained   levels of
 sequestration) \7\.             or improved.       primary,
                                                    secondary, and
                                                    heavily degraded
                                                    forest ratios
                                                    \8\.
                               ---------------------------------------------------------------------------------
                                Peat land          Conditions of      Ha in compliance  TBD........  TBD
                                 saturation and     peat lands,        with
                                 level of           method             preservation
                                 groundwater.       appropriate for    standard.
                                                    each project
                                                    area TBD.
----------------------------------------------------------------------------------------------------------------
                                                  Output Level
----------------------------------------------------------------------------------------------------------------
Revised spatial plans.........  Number of spatial  Number of spatial  Number..........  0..........  10
                                 plans updated or   plans at the
                                 improved.          district and
                                                    provincial
                                                    levels that
                                                    include
                                                    licensing and
                                                    administrative
                                                    boundary
                                                    information.
----------------------------------------------------------------------------------------------------------------
Increased community engagement  Increase in        Number of          Ha..............  TBD........  TBD
                                 community land     hectares brought
                                 oversight.         under community
                                                    conservation
                                                    plans.
                               ---------------------------------------------------------------------------------
                                Amount of forest   Community-based    Ha..............  TBD........  TBD
                                 cover monitored.   forest
                                                    management area
                                                    designations
                                                    increased.
                               ---------------------------------------------------------------------------------
Increased community knowledge.  Development and    Number of Centers  Number..........  TBD........  TBD
                                 improvement of     of Excellence
                                 Centers of         that receive
                                 Excellence.        project support
                                                    to promote low
                                                    carbon
                                                    development.
----------------------------------------------------------------------------------------------------------------
                                Trained            Number of micro/   Number..........  TBD........  TBD
                                 stakeholders.      small/medium
                                                    enterprises,
                                                    civil society
                                                    organizations,
                                                    cooperatives,
                                                    communities and
                                                    local officials
                                                    trained on
                                                    sustainable, low
                                                    carbon
                                                    development.
----------------------------------------------------------------------------------------------------------------

     
---------------------------------------------------------------------------

    \3\ All baseline and target values will be established for the 
geographic areas targeted by the project activities, likely at the 
district or sub-district level.
    \4\ If feasible, this indicator will be modified to include 
home-based industry and small businesses.
    \5\ Electrified shall be further defined to establish the 
minimum level of power and hours of available supply required to be 
classified as ``electrified.''
    \6\ Data sources provide differing figures for electrification 
rates. Because local governments track electricity connections at 
the district and provincial levels, baseline data will be determined 
prior to entry into force for the candidate districts of Jambi and 
West Sulawesi that will receive support during the first phase of 
the Project. Similar exercises will be done for remaining districts 
as site selection takes place.
    \7\ Methods for estimating emission reductions related to 
maintaining or improving carbon sinks (sequestration) in project 
areas will be established for project activities in the targeted 
areas by entry into force.
    \8\ Emission factors of different landscapes will need to be 
determined.

                                 Table 3--Procurement Modernization Project \9\
----------------------------------------------------------------------------------------------------------------
                                                                           Unit of                      Year 5
            Result                  Indicator          Definition        measurement      Baseline      target
----------------------------------------------------------------------------------------------------------------
                                                 Objective Level
----------------------------------------------------------------------------------------------------------------
Government savings............  Reduced            Expenditures on    Percent.........  TBD........  -2.5%
                                 expenditure on     key goods and
                                 goods and          services* over
                                 services.          time as the
                                                    [purchase price/
                                                    market price].
                               ---------------------------------------------------------------------------------
                                Improved quality   Increased quality  Percent.........  TBD........  TBD
                                 of goods and       of key goods and
                                 services.          services* over
                                                    time per
                                                    qualitative
                                                    audit.
----------------------------------------------------------------------------------------------------------------
Reduction in bunching.........  Reduction in       [Annual            PSU expenditure/  TBD........  TBD
                                 unspent and        expenditure of     Allocation.
                                 delay of           PSU/Annual
                                 spending           allocation].
                                 allocated budget.
----------------------------------------------------------------------------------------------------------------
                                                  Outcome Level
----------------------------------------------------------------------------------------------------------------
Project Benefits..............  Number of          Procurement        Number..........  0..........  60
                                 procurement        service units
                                 service units.     supported by
                                                    project.
                               ---------------------------------------------------------------------------------

[[Page 73715]]

 
                                Number of          Public private     Number..........  0..........  TBD
                                 additional         partnerships
                                 public private     established with
                                 partnerships.      the GOI.
                               ---------------------------------------------------------------------------------
                                Establishment of   Integrated e-      Number..........  0..........  TBD
                                 procurement        catalog and
                                 information        procurement
                                 systems.           management
                                                    system operating
                                                    in supported
                                                    PSUs.
----------------------------------------------------------------------------------------------------------------
                                                  Output Level
----------------------------------------------------------------------------------------------------------------
Increased Competition.........  Average number of  [number of         Number of         TBD........  TBD
                                 bidders.           bidders per        bidders/Total
                                                    procurement/       procurements.
                                                    total number of
                                                    procurements].
                               ---------------------------------------------------------------------------------
                                Decrease in sole   [number of sole    Sole source       TBD........  TBD
                                 source             source/total       procurements/
                                 procurements.      number of          Total
                                                    procurements].     procurements.
                               ---------------------------------------------------------------------------------
                                Decrease in        [number of         Procurements      TBD........  TBD
                                 cancelled          cancelled/total    cancelled/Total
                                 procurements.      number of          procurements.
                                                    procurements].
                               ---------------------------------------------------------------------------------
                                Increased PSU      [number of         Responses/        TBD........  TBD
                                 responsiveness     responses/number   complaints.
                                 to complaints.     of complaints].
                               ---------------------------------------------------------------------------------
                                Number of          Number of          Number..........  TBD........  TBD
                                 protests filed.    protests to
                                                    procurement
                                                    actions by
                                                    private firms.
                               ---------------------------------------------------------------------------------
                                Percent of         [Decisions to      Percent.........  TBD........  TBD
                                 protests in        reverse award/
                                 which award was    number of
                                 reversed.          protests].
----------------------------------------------------------------------------------------------------------------
Increased Efficiency..........  Average time to    Days required to   [Days to prepare  TBD........  TBD
                                 prepare bid.       prepare bid, on    bidding
                                                    average.           documents/
                                                                       prepared bids].
                               ---------------------------------------------------------------------------------
                                Average number of  Days required to   [Days to          TBD........  TBD
                                 days for bid       evaluate bid, on   evaluate bids/
                                 evaluation.        average.           number of bids
                                                                       evaluated].
                               ---------------------------------------------------------------------------------
                                Average number of  Number of days     [Days from        TBD........  TBD
                                 days from          between            evaluation to
                                 evaluation to      completion of      award/number of
                                 award.             the evaluation     evaluated
                                                    of bids to the     procurements].
                                                    award of a
                                                    contract.
----------------------------------------------------------------------------------------------------------------

     
---------------------------------------------------------------------------

    \9\ The table of indicators refers to data that will be drawn 
from contracts. All contract data will be made anonymous to ensure 
confidentiality; key variables such as technical specifications, bid 
prices, and final prices will be necessary. In addition, procuring 
entities will be required to share (and in some cases collect) data 
on sole source procurements, protests, complaints, and other 
relevant indicators.
---------------------------------------------------------------------------

    (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 
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 different implementation units 
and reporting institutions. Such data quality reviews also will serve 
to identify where those levels of quality are not possible, given the 
realities of data collection.
    (d) Management Information System. The M&E Plan will describe the 
information system that will be used to collect data, store, process 
and deliver information to relevant stakeholders in such a way that the 
Program information collected and verified pursuant to the M&E Plan is 
at all times accessible and useful to those who wish to use it. The 
system development will take into consideration the requirement and 
data needs of the components of the Program, and will be aligned with 
existing MCC systems, other service providers, and ministries.
    (e) Role of MCA-Indonesia. The monitoring and evaluation of this 
Compact spans three discrete Projects and will involve a variety of 
governmental, nongovernmental, and private sector institutions. In 
accordance with the designation contemplated by Section 3.2(b) of this 
Compact, MCA-Indonesia is responsible for implementation of the M&E 
Plan. MCA-Indonesia will oversee all Compact-related monitoring and

[[Page 73716]]

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: (i) Impact evaluations; (ii) project performance 
evaluations; and (iii) 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 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) Community-Based Nutrition Project. The evaluation will focus on 
determining both household level impacts on stunting outcomes as well 
as the effect of incentives for communities and health workers and the 
effects of gender integration strategies on women's empowerment, 
possibly through a qualitative gender module. The household level 
impacts of interest include reduced expenditures on healthcare and 
improved wellbeing, including through height and weight measures. The 
impact is expected to be determined through randomization of the 
intervention which will permit a comparison of the beneficiary 
households to households in similar circumstances outside the project 
areas. Baseline, midterm and endline data collection at the household 
level will supply data for estimating the Project's effects. The 
evaluation will attempt to isolate the impact of Generasi, Generasi 
Plus, and Generasi Plus without the planned incentives to better 
estimate the effect of each set of interventions in combination and 
separately. In close coordination with MCA-Indonesia, the PSF will be 
responsible for management of data collection and MCC will directly 
contract a firm to manage the overall evaluation.
    (ii) GP Project. The evaluation will examine the (1) increased 
productivity resulting from electrification through renewable energy 
sources, (2) increased household and firm incomes resulting from 
renewable energy resources and improvement in agricultural and land 
management practices, and (3) impact of Project activities on reducing 
land and fossil fuel-based emissions.
    (iii) Procurement Modernization Project. The evaluation will 
include an analysis of the savings, improved quality, and increased 
efficiency of procurement service units. The methodology is expected to 
employ quasi-experimental techniques comparing PSUs that do not receive 
project support to those PSUs that do receive Project support. The 
methodology also will ensure similarity across key characteristics, 
such as levels of procurement flows, information technology capacity, 
and population size.
    (b) Final Evaluation. The M&E Plan will make provision for final 
Project level evaluations (``Final Evaluations''). With the prior 
written approval of MCC, the Government will engage independent 
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 Activities; (ii) 
determine if and analyze the reasons why the Compact Goal 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.
    (c) 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 the Government 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 the Government may request special studies or ad hoc 
evaluations of Projects, Activities, or the Program as a whole prior to 
the expiration of the Compact Term. When MCA-Indonesia engages an 
evaluator, the engagement will be subject to the prior written approval 
of MCC. For all evaluations of Compact Projects, whether commissioned 
by MCC, MCA-Indonesia or the Government, contract terms shall ensure 
non-biased results and the publication of results.
    (d) Request for Ad Hoc Evaluation or Special Study. If the 
Government 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 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 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 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 other Party.

6. Approval and Implementation of the M&E Plan

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

Annex IV--Conditions Precedent 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''). Upon execution of the Program Implementation 
Agreement, each CIF Disbursement will be subject to the terms of the 
Program Implementation Agreement.

[[Page 73717]]

1. Conditions Precedent to Initial CIF Disbursement

    Each of the following must have occurred or been satisfied to MCC's 
satisfaction prior to the initial CIF Disbursement:
    (a) The Government will have published the Establishment Decree, 
and such decree will remain in full force and effect, without 
modification, alteration, rescission, or suspension of any kind unless 
otherwise agreed by MCC.
    (b) The Government (or MCA-Indonesia) has delivered to MCC:
    (i) An interim fiscal accountability plan acceptable to MCC; and
    (ii) A CIF procurement plan acceptable to MCC.
    (c) MCA-Indonesia will be sufficiently mobilized in order for MCA-
Indonesia to be able to fully perform its obligations relevant to the 
particular Disbursement Request and to act on behalf of the Government.
    (d) The Government will have enacted such decrees and regulations 
as necessary to implement Section 2.8 of this Compact.

2. Conditions Precedent to All CIF Disbursements (Including Initial CIF 
Disbursement)

    Each of the following must have occurred or been satisfied prior to 
each CIF Disbursement:
    (a) The Government (or MCA-Indonesia) has delivered to MCC the 
following documents, in form and substance satisfactory to MCC:
    (i) A completed Disbursement Request, together with the applicable 
Periodic Reports, for the applicable Disbursement Period, all in 
accordance with the Reporting Guidelines; and
    (ii) A certificate of the Government (or MCA-Indonesia), dated as 
of the date of the Disbursement Request, in such form as provided by 
MCC.
    (b) If any proceeds of the CIF Disbursement are to be deposited in 
a bank account, MCC has received satisfactory evidence that (i) the 
Bank Agreement has been executed and (ii) the Permitted Accounts have 
been established.
    (c) Appointment of an entity or individual to provide fiscal agent 
services, as approved by MCC, until such time as the Government 
provides to MCC a true and complete copy of a Fiscal Agent Agreement, 
duly executed and in full force and effect, and the fiscal agent 
engaged thereby is mobilized.
    (d) Appointment of an entity or individual to provide procurement 
agent services, as approved by MCC, until such time as the Government 
provides to MCC a true and complete copy of the Procurement Agent 
Agreement, duly executed and in full force and effect, and the 
procurement agent engaged thereby is mobilized.
    (e) MCC is satisfied, in its sole discretion, that (i) the 
activities being funded with such CIF Disbursement are necessary, 
advisable or otherwise consistent with the goal of facilitating the 
implementation of the Compact and will not violate any applicable law 
or regulation; (ii) no material default or breach of any covenant, 
obligation or responsibility by the Government, MCA-Indonesia or any 
Government entity has occurred and is continuing under this Compact or 
any Supplemental Agreement; (iii) there has been no violation of, and 
the use of requested funds for the purposes requested will not violate, 
the limitations on use or treatment of MCC Funding set forth in Section 
2.7 of this Compact or in any applicable law or regulation; (iv) any 
Taxes paid with MCC Funding through the date 90 days prior to the start 
of the applicable Disbursement Period have been reimbursed by the 
Government in full in accordance with Section 2.8(c) of this Compact; 
and (v) the Government has satisfied all of its payment obligations, 
including any insurance, indemnification, tax payments or other 
obligations, and contributed all resources required from it, under this 
Compact and any Supplemental Agreement.
    (f) For any CIF Disbursement occurring after this Compact has 
entered into force in accordance with Article 7: MCC is satisfied, in 
its sole discretion, that the Government has satisfied any terms and 
conditions to CIF Disbursements as may be set forth in the Program 
Implementation Agreement.
    (g) MCC has not determined, in its sole discretion, that an act, 
omission, condition, or event has occurred that would be the basis for 
MCC to suspend or terminate, in whole or in part, the Compact or MCC 
Funding in accordance with Section 5.1 of this Compact.

Annex V--Definitions

    Activity has the meaning provided in paragraph 2(a) of Part A of 
Annex I.
    Additional Representative has the meaning provided in Section 4.2.
    Assessment has the meaning provided in paragraph 1 of Schedule 3 to 
Annex I.
    Audit Guidelines has the meaning provided in Section 3.8(a).
    Bank Agreement means an agreement, in form and substance 
satisfactory to MCC, with the financial institution approved by MCC to 
hold Permitted Accounts and that sets forth the signatory authority, 
access rights, anti-money laundering and anti-terrorist financing 
provisions, and other terms related to such Permitted Account.
    BAPPENAS has the meaning provided in paragraph 1(a) of Part A of 
Annex I.
    Baseline has the meaning provided in paragraph 3 of Annex III.
    BPKP has the meaning provided in paragraph 1(a)(i)(D) of Schedule 3 
to Annex I.
    Board has the meaning provided in paragraph 2 of Part C of Annex I.
    CIF Disbursement has the meaning provided in Annex IV.
    Communications, Project Management and Evaluation Activity has the 
meaning provided in paragraph 1 of Schedule 2 to Annex I.
    Community-Based Nutrition Project has the meaning provided in 
Schedule 2 to Annex I.
    Community Projects Activity has the meaning provided in paragraph 1 
of Schedule 2 to 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.
    Covered Provider has the meaning provided in Section 3.7(c).
    Disbursement has the meaning provided in Section 2.4.
    Disbursement Period means each fiscal quarter or any other period 
of time as agreed by MCC.
    Disbursement Request means a written request substantially in the 
form of the ``Disbursement Request and Quarterly Financial Report'' 
posted on the MCC Web site, as the same may be amended from time to 
time.
    EHS has the meaning provided in paragraph 3 of Schedule 2 to Annex 
I.
    ESA has the meaning provided in paragraph 3 of Schedule 1 to Annex 
I.
    ESDM has the meaning provided in paragraph 7 of Schedule 1 to Annex 
I.
    ESMS has the meaning provided in paragraph 3 of Schedule 1 to Annex 
I.
    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).
    Final Evaluations has the meaning provided in paragraph 4(b) of 
Annex III.
    Fiscal Agent has the meaning provided in paragraph 6 of Part C of 
Annex I.

[[Page 73718]]

    Fiscal Agent Agreement means an agreement between MCA-Indonesia and 
the Fiscal Agent, in form and substance satisfactory to MCC, which sets 
forth the roles and responsibilities of the Fiscal Agent and other 
appropriate terms and conditions.
    Fiscal Agent Disbursement Certificate has the meaning provided in 
Section 3.4(a)(v) of the PIA.
    FIT has the meaning provided in paragraph 7 of Schedule 1 to Annex 
I.
    Generasi has the meaning provided in paragraph 1 of Schedule 2 to 
Annex I.
    Generasi Plus has the meaning provided in paragraph 1 of Schedule 2 
to Annex I.
    Goal Indicators has the meaning provided in paragraph 3(a) of Annex 
III.
    Governance Guidelines means MCC's Guidelines for Accountable 
Entities and Implementation Structures, as such may be posted on MCC's 
Web site from time to time. Government has the meaning provided in the 
Preamble.
    GP Facility has the meaning provided in paragraph 1 of Schedule 1 
to Annex I.
    GP Facility Activity has the meaning provided in paragraph 1 of 
Schedule 1 to Annex I.
    GP Facility Manager has the meaning provided in paragraph 1(c) of 
Schedule 1 to Annex I.
    GP Objective has the meaning provided in Section 1.2(a).
    GP Project has the meaning provided in Schedule 1 to Annex I.
    Grant has the meaning provided in Section 3.6(b).
    Green Knowledge Activity has the meaning provided in paragraph 1 of 
Schedule 1 to Annex I.
    IFC Performance Standards means the performance standards on 
environmental and social sustainability promulgated by the 
International Finance Corporation from time to time.
    Implementing Entity has the meaning provided in paragraph 5 of Part 
C of Annex I.
    Implementing Entity Agreement has the meaning provided in paragraph 
5 of Part C of Annex I.
    Implementation Letter has the meaning provided in Section 3.5.
    Implementing Regulations has the meaning provided in paragraph 2 of 
Part C of Annex I.
    Implementing Team has the meaning provided in paragraph 3 of Part C 
of Annex I.
    Indicators has the meaning provided in paragraph 3(a) of Annex III.
    Inspector General has the meaning provided in Section 3.7(d).
    Intellectual Property means all registered and unregistered 
trademarks, service marks, logos, names, trade names and all other 
trademark rights; all registered and unregistered copyrights; all 
patents, inventions, shop rights, know how, trade secrets, designs, 
drawings, art work, plans, prints, manuals, computer files, computer 
software, hard copy files, catalogues, specifications, and other 
proprietary technology and similar information; and all registrations 
for, and applications for registration of, any of the foregoing, that 
are financed, in whole or in part, using MCC Funding.
    Investment Criteria has the meaning provided in paragraph 1(c) of 
Schedule 1 to Annex I.
    ISP3 has the meaning provided in paragraph 4 of Schedule 3 to Annex 
I.
    LKPP has the meaning provided in paragraph 1 of Schedule 3 to Annex 
I.
    M&E Plan has the meaning provided in Annex III.
    MCA Act has the meaning provided in Section 2.2(a).
    MCA-Indonesia has the meaning provided in Section 3.2(b).
    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 means the MCC ``Gender Policy'' (including any 
guidance documents issued in connection with the guidelines) posted 
from time to time on the MCC Web site or otherwise made available to 
the Government.
    MCC Policy for Monitoring and Evaluation of Compacts and Threshold 
Programs has the meaning provided in Annex III.
    MCC Program Procurement Guidelines has the meaning provided in 
Section 3.6(a).
    MCC Web site has the meaning provided in Section 2.7.
    MOH has the meaning provided in paragraph 6 of Schedule 2 to Annex 
I.
    MOHA has the meaning provided in paragraph 1 of Schedule 2 to Annex 
I.
    Monitoring Component has the meaning provided in paragraph 1 of 
Annex III.
    Multi-Year Financial Plan Summary has the meaning provided in 
paragraph 1 of Annex II.
    Nutrition Objective has the meaning provided in Section 1.2(b).
    OP 4.12 has the meaning provided in paragraph 3 of Part A of Annex 
I.
    Operations Manual has the meaning provided in paragraph 1(c) of 
Schedule 1 to Annex I.
    Participatory Land Use Planning Activity has the meaning provided 
in paragraph 1 of Schedule 1 to Annex I.
    Party and Parties have the meaning provided in the Preamble.
    Periodic Report means the periodic reports and information required 
by the Reporting Guidelines.
    Permitted Account has the meaning provided in Section 2.4.
    Phase One has the meaning provided in paragraph 1 of Schedule 3 to 
Annex I.
    Phase Two has the meaning provided in paragraph 1 of Schedule 3 to 
Annex I.
    Plan has the meaning provided in paragraph 1 of Schedule 1 to Annex 
I.
    PLN means Perusahaan Listrik Negara, the Indonesian state 
electricity company.
    PNPM means the Government's National Community Empowerment Program 
(Program Nasional Pemberdayaan Masyarakat).
    Policy and Procedure Activity has the meaning provided in paragraph 
1 of Schedule 3 to Annex I.
    PPPs has the meaning provided in paragraph 1 of Schedule 3 to Annex 
I.
    Principal Representative has the meaning provided in Section 4.2.
    Procurement Agent has the meaning provided in paragraph 7 of Part C 
of Annex I.
    Procurement Agent Agreement means the agreement between MCA-
Indonesia and the Procurement Agent, in form and substance satisfactory 
to MCC, which sets forth the roles and responsibilities of the 
Procurement Agent with respect to the conduct, monitoring, and review 
of procurements and other appropriate terms and conditions.
    Procurement Modernization Objective has the meaning provided in 
Section 1.2(c).
    Procurement Modernization Project has the meaning provided in 
Schedule 3 to Annex I.
    Procurement Professionalization Activity has the meaning provided 
in paragraph 1 of Schedule 3 to Annex I.
    Program has the meaning provided in the Preamble.
    Program Assets means 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 MCC Gender Policy, the Governance 
Guidelines, the MCC Program Procurement Guidelines, the Reporting 
Guidelines, the MCC Policy for Monitoring and Evaluation of Compacts 
and Threshold Programs, the MCC Cost Principles for Government 
Affiliates Involved in Compact Implementation (including any successor 
to any of the

[[Page 73719]]

foregoing) and any other guidelines, policies or guidance papers 
relating to the administration of MCC-funded compact programs and as 
from time to time published on the MCC Web site.
    Program Implementation Agreement and PIA have the meaning provided 
in Section 3.1.
    Project(s) has the meaning provided in Section 1.2.
    Project Objective(s) has the meaning provided in Section 1.2.
    Project Objectives Indicators has the meaning provided in paragraph 
3(a) of Annex III.
    Project Outcome Indicators has the meaning provided in paragraph 
3(a) of Annex III.
    Provider has the meaning provided in Section 3.7(c).
    PSF has the meaning provided in paragraph 1 of Schedule 2 to Annex 
I.
    PSUs has the meaning provided in paragraph 1 of Schedule 3 to Annex 
I.
    REDD+ means reducing emissions from deforestation and forest 
degradation, and the role of conservation, sustainable management of 
forests and enhancement of forest carbon stocks.
    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.
    SC has the meaning provided in paragraph 1(a) of Part A of Annex I.
    Service Providers has the meaning provided in paragraph 1 of 
Schedule 2 to Annex I.
    SME means small and medium-sized enterprises.
    Social and Gender Integration Plan has the meaning provided in 
paragraph 3 of Part A of Annex I.
    Stakeholders Group has the meaning provided in paragraph 4 of Part 
C of Annex I.
    SUN has the meaning provided in paragraph 4 of Schedule 2 to Annex 
I.
    Supplemental Agreement means any agreement between: (a) the 
Government (or any Government affiliate) and MCC (including, but not 
limited to, the PIA); or (b) MCC and/or the Government (or any 
Government affiliate), on the one hand, and any third party, on the 
other hand, including any of the Providers, in each case, setting forth 
the details of any funding, implementing or other arrangements in 
furtherance of and in compliance with this Compact.
    Supply Side Activity has the meaning provided in paragraph 1 of 
Schedule 2 to Annex I.
    Target has the meaning provided in paragraph 3(a) of Annex III.
    Targeted Gender Activities has the meaning provided in paragraph 3 
of Part A of Annex I.
    Taxes has the meaning provided in Section 2.8(a).
    Technical Assistance and Oversight Activity has the meaning 
provided in paragraph 1 of Schedule 1 to Annex I.
    Training Program has the meaning provided in paragraph 1(b)(i) of 
Schedule 2 to Annex I.
    Transfer Agreement has the meaning provided in paragraph 1 of 
Schedule 2 to Annex I.
    United States Dollars or US$ means the lawful currency of the 
United States of America.
    USAID has the meaning provided in paragraph 5 of Schedule 1 to 
Annex I.
    U.S. Government means the government of the United States of 
America.

[FR Doc. 2011-30706 Filed 11-28-11; 8:45 am]
BILLING CODE 9211-03-P