Federal Register: July 22, 2008 (Volume 73, Number 141)

DOCID: fr22jy08-86 FR Doc E8-16755

MILLENNIUM CHALLENGE CORPORATION

Millennium Challenge Corporation

MCC ID: [MCC FR 08-07]

NOTICE: NOTICES

DOCID: fr22jy08-86

DOCUMENT ACTION: Notice.

SUBJECT CATEGORY:

Notice of Entering Into a Compact With the Government of Burkina Faso

DOCUMENT SUMMARY:

In accordance with Section 610(b)(2) of the Millennium Challenge Act of 2003 (Pub. L. 108199, Division D), the Millennium Challenge Corporation (MCC) is publishing a summary and the complete text of the Millennium Challenge Compact between the United States of America, acting through the Millennium Challenge Corporation, and the Government of Burkina Faso. Representatives of the United States Government and the Government of Burkina Faso executed the Compact documents on July 14, 2008.

Dated: July 17, 2008.
William G. Anderson Jr.,
Vice President & General Counsel, Millennium Challenge Corporation. Summary of Millennium Challenge Compact With the Government of Burkina Faso

A. Introduction

Burkina Faso is a landlocked country in Africa's Sahel region, bordering Benin, Cote d'Ivoire, Ghana, Mali, Niger, and Togo, with a population of approximately 15.26 million people. It is one of the poorest countries in the world, ranking 176 out of 177 countries as surveyed by the United Nations Development Program's 2007 Human Development Index. In an effort to address constraints to investment, Burkina Faso has undertaken several broad macroeconomic reforms since the mid1990s, including marketoriented reforms, decentralization of power from the central government to local governments, adoption of a new labor code, and business climate improvements. In light of these efforts, in 2007, the International Finance Corporation named Burkina Faso one of the top reformers in West Africa. In January 2008, Burkina Faso began a twoyear term on the United Nations Security Council. Despite these reforms, recognitions, and moderate economic gains, Burkina Faso continues to face severe constraints to growth and poverty reduction.

B. Program Overview, Budget, and Impact

Constraints are particularly acute in rural areas. Agricultural activities involve 85 percent of the country's active population and contribute to approximately 36 percent of GDP and 88 percent of export earnings. Rural populations in Burkina Faso currently lack access to basic inputs needed to improve agricultural and livestock productivity, including secure land, skilled labor, adequate water resources, sufficient volumes of credit, and adequate access to markets. To address these constraints, the government of Burkina Faso (``GoBF'') has proposed a US$480,943,569, fiveyear Millennium Challenge Compact (``Compact'') that will consist of four interdependent projects:

  • Rural Land Governance Projectdesigned to increase investment in land and rural productivity through improved land tenure security and land management;
  • Agriculture Development Projectdesigned to expand the productive use of land in order to increase the volume
    [[Page 42602]]
    and value of agricultural production in project zones;
  • Roads Projectdesigned to enhance access to markets through investments in the road network; and
  • BRIGHT 2 Schools Projectdesigned to increase primary school completion rates for girls (each of the four projects is referred to herein as a ``Project'').

    Table 1 below sets forth the Compact program (``Program'') budget at the Project level.
    Table 1.Program Budget by Project [US$ millions] Component CIF\*\ Year 1 Year 2 Year 3 Year 4 Year 5 Total Rural Land Governance Project................................ 1.10 7.21 13.00 15.60 14.08 8.94 59.93 Agriculture Development Project.............................. 4.77 17.91 40.95 44.03 25.28 8.97 141.91 Roads Project................................................ 0.34 3.05 32.97 93.23 58.60 5.94 194.13 Bright 2 Schools Project..................................... 3.00 25.83 ........... ........... ........... ........... 28.83 Monitoring & Evaluation...................................... 0.45 1.72 1.21 1.46 1.36 1.68 7.88 Program Administration and Oversight......................... 6.44 7.95 8.17 8.87 8.45 8.38 48.26

    Total MCC Funding........................................ $16.10 $63.67 $96.30 $163.19 $107.77 $33.91 $480.94 \*\ Compact Implementation Funds (CIF) refer to funding available before the entryintoforce of the Compact.

    Important synergies exist among the four Projects. The Agriculture Development Project will alleviate the constraint of poor water availability with investments in irrigation infrastructure and water management. This Project also will increase the availability of rural credit and provide technical assistance to farmers' groups and individual households, improving their ability to produce highervalue agricultural and livestock products. Complementary Rural Land Governance activities will secure land in the Agricultural Development Project areas and other areas, reducing economic losses due to land conflict or risk of conflict and encouraging productive investment in land. The Roads Project will rehabilitate rural and primary roads near the production zones, increasing opportunities for farmers to sell agricultural products and livestock, as well as to buy the necessary inputs. Finally, the BRIGHT 2 Schools Project will improve girls' literacy and numeracy skills, which will improve capacity for productive employment opportunities in the longer term.

    1. Rural Land Governance Project ($59.93 million)

    The Rural Land Governance Project will assist the GoBF to fulfill its commitment to achieve a new rural land tenure framework by addressing the three constraints to rural economic activity, as identified by the GoBF through a consultative process: (a) Difficult access to formal land use rights; (b) unclear land rights leading to endemic and sometimes violent conflict; and (c) poor use of land resources resulting in land degradation.

    A new rural land law is expected to be adopted prior to entry into force of the Compact, and will be based on the existing, stakeholder driven 2007 rural land policy. The Project also will support the GoBF's implementation of the 2004 decentralization law that authorizes transfer of key aspects of land governance to municipal governments. The Project consists of the following three mutually reinforcing activities:
    (a) Legal and Procedural Change and Communication to support the GoBF's effort to develop and implement improved rural land legislation and to develop, revise and implement other legal and procedural frameworks;
    (b) Institutional Development and Capacity Building which, in conjunction with the previous activity, is expected to improve institutional capacity to deliver land services in rural areas; and (c) SiteSpecific Land Tenure Interventions to ensure that the previous two activities yield their intended benefits across municipalities and in targeted agricultural development zones.

    Most of the Project's site specific interventions will be scalable through a phased approach, thus enabling the expected returns on an initial share of the investments to be tested before the Project is expanded. Phase one will target 17 municipalities with a complete package of technical assistance and infrastructure construction, and a set of upfront investments that are not municipalityspecific. The decision to move forward with phase two will be subject to the Project's satisfactory performance on specific economic, legal and policy indicators. Phase two will include the balance of the Compact's term and target up to 30 additional municipalities for technical assistance and infrastructure, and expand investments associated with other subactivities.

    2. Agriculture Development Project ($141.91 million)

    The Agriculture Development Project is designed to address core constraints typical of rural Burkina Faso: (a) Poor water resource availability and management; (b) weak beneficiary capacity; (c) lack of access to pricing information, markets, and inputs; and (d) lack of access to credit. This Project has synergies with MCC's other investments in rural land governance and roads infrastructure. Improvements in the road network will reduce constraints that producers face in terms of isolation from markets and high transport costs, while investments in land tenure security will be an important factor in motivating producers to invest time and capital in their operations. The Project consists of the following three activities:
    (a) Water Management and Irrigation to ensure adequate water availability, water delivery, flood control, and dam safety to support and protect investments in the Sourou Valley and to ensure better water resource management in the Como[eacute] Basin;
    (b) Diversified Agriculture to build on the delivery of water in the Project zones by supporting onfarm production and related activities throughout the agricultural value chain; and
    (c) Access to Rural Finance to increase medium and longterm credit in the four western regions of SudOuest, Hauts Bassins, Cascades, and Boucle du Mouhoun.

    3. Roads Project ($194.13 million)

    Burkina Faso's Poverty Reduction Strategy Paper identifies infrastructure development as a critical priority for increased economic growth. For a
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    landlocked country, the road transport network is an important asset for economic development to facilitate trade and communications with regional and international markets and to improve local connectivity of farms to markets. Road network investments also improve access to social services in rural communities, such as those in western Burkina Faso, which currently are underserved due to an inadequate transport system.

    The Project is designed to (a) improve access to agricultural markets by upgrading primary and rural road segments serving the Sourou Valley and the Como[eacute] Basin; (b) reduce travel time to markets and vehicle operating costs; and (c) ensure sustainability of the road network by strengthening road maintenance. Benefits are expected to result primarily from increasing the yearround accessibility to markets of agriculturally productive regions that are typically cut off during the rainy season.

    The Project consists of the following four activities: (a) Development of Primary Roads to support the improvements of three primary road segments in western Burkina Faso currently projected to total 271 kilometers;
    (b) Development of Rural Roads to support the improvement of 151 kilometers of road segments located in three rural areas in the Como[eacute] Basin of southwestern Burkina Faso. These roads currently exist as rural tracks and improvements will include upgrading to a fully engineered rural road standard;
    (c) Capacity Building and Technical Assistance to reinforce the effectiveness of existing government agencies and private sector institutions involved in road maintenance planning and implementation; and
    (d) Incentive Matching Fund for Periodic Road Maintenance to set the GoBF on a path toward longterm, sustainable funding of periodic, or major, maintenance on the full road network in Burkina Faso. 4. Bright 2 Schools Project ($28.83 million)

    The BRIGHT 2 Schools Project extends the successful threshold program that focused on improving primary school completion rates for girls. The Project will consist of two phases. Phase one, scheduled for September 2008 to December 2009, will be an interim phase to provide temporary classroom solutions, maintain community interest at the Project schools, and prepare for the construction phase. Phase two, scheduled from the date the Compact enters into force and for the three consecutive years thereafter, will consist of construction work and other activities. The Project includes the construction of: (a) Up to 50 additional boreholes; (b) an additional classroom block of three classrooms for grades 46 at each of the 132 locations (for a total of 396 additional classrooms); and (c) of 122 bisongos (kindergartens), including playground and equipment. The Project will also provide daily meals (takehome rations) during all nine months of the school year for the approximately 100 children estimated to be enrolled at each of the 132 bisongos (including ten bisongos financed under the threshold program), and will fund a social mobilization campaign and an adult literacy/management of microprojects activity.

    The BRIGHT 2 Schools Project will be administered by the United States Agency for International Development (USAID) pursuant to an interagency agreement under Section 632(b) of the Foreign Assistance Act of 1961, as amended. MCC funds will cover direct and indirect costs incurred by USAID for the implementation of this Project.

    C. Program Management

    The GoBF, by a decree of the Council of Ministers dated April 18, 2008, established MCABurkina Faso to serve as the accountable entity for implementation of the Compact. MCABurkina Faso will be administered and managed by an independent board of directors (``Board'') that will make strategic decisions and provide oversight. The Board will be comprised of eleven voting members, including six government officials. The Board also will benefit from the participation of a stakeholders committee consisting of up to 28 members including government officials, and representatives from the private sector and civil society. In addition to the Board, a management unit, led by a national coordinator, will manage the dayto day activities of MCABurkina Faso and will be supported by key officers, technical staff, and administrative personnel.

    MCABurkina Faso will engage line ministries and public institutions to serve as implementing entities. However, as the accountable entity, MCABurkina Faso will remain responsible for the successful implementation of the Compact. In addition, the GoBF has appointed, through competitive processes approved by MCC, thirdparty fiscal and procurement agents. As a government entity, MCABurkina Faso will be subject to GoBF audit requirements as well as audits required by the Compact.
    D. Assessment

    1. Economic and Beneficiary Analysis

    Many of the Compact investments are focused in the Boucle de Mouhoun region, the third poorest of Burkina Faso's 13 regions. Approximately 80 percent of the region's 1.4 million people live on less than $1 per day. A smaller number of investments will be made in the Como[eacute] region with an estimated population of 490,000. The table below summarizes the economic and beneficiary analysis for each Project.
    Table 2.Projected Beneficiaries and Economic Rates of Return Project Beneficiaries ERR Description Rural Land Governance............ Up to 415,200 TBD (based on assessment The project is households, comprising of pilot investment). predicated on the up to 2,490,000 benefits of reducing individuals, from 47 of land conflict. This Burkina Faso's 302 assumption will be rural communes will tested during a pilot have access to local phase and will inform land registration and an ERRbased decision titling services, on scaling up the including up to 138,000 project. individuals who will
    benefit from up to
    23,000 land titles
    expected to be
    delivered.
    Agricultural Development......... Up to 150,000 farmers, 7%....................... ERRs for the irrigation herders, members of works are especially producers groups and sensitive to crop other traders, many of prices. To be whom currently live on conservative, MCC used less than $2 per day, a composite of will benefit from historical averages for improved agricultural key crops instead of and livestock current prices. Today's production conditions, prices would result in better water a higher overall managements, and Project ERR. improved access to
    credit.
    [[Page 42604]]
    Roads............................ A portion of the 2.4 2%....................... In spite of low ERRs for million inhabitants of the three primary the nine provinces roads, these are surrounding the primary critical links to MCC roads and up to 65,000 funded agricultural inhabitants of the 30 zones, allowing villages serviced by producers better access rural roads. Many of to markets, health and these beneficiaries are education facilities, likely to be farmers and facilitating trade buying and selling with neighboring agricultural produce. countries. BRIGHT 2 Schools................. Up to 19,800 children, Not applicable........... This project is an including 9,900 girls. extension of a successful threshold program and will be administered by USAID. As such, it was not subjected to MCC due diligence standards, including ERR calculations.

    In addition to the beneficiaries identified above, nationallevel benefits are expected to result from the new land law associated with the Rural Land Governance Project and from the Roads Project's support of systemic improvements in the GoBF's longterm road maintenance strategy. Because the Projects are overlapping and there are synergies among projects, numerous individuals will benefit from more than one project. Drawing on lessons learned from previous Compacts, the cost estimates for Burkina Faso's largescale infrastructure projects are conservative. For the Roads Project, base costs were derived from full feasibilitylevel studies and then doubled during due diligence, as MCC accounted for contingencies, environmental and social costs, and the higher costs of construction in a landlocked West Africa country. On the benefit side, MCC has generally not included benefits that cannot be quantified, a particular problem in a datapoor environment like Burkina Faso. In evaluating the Roads Project investment, MCC took into account the linkages between MCCfunded agricultural investments and markets, both national and regional. In particular, one road segment in the Boucle de Mouhoun region provides a critical link to the Mali border and is likely to reduce travel times and costs between Bamako and Ouagadougou. Another road segment in the Como[eacute] Region provides an important link to Banfora, a regional market town that is frequented by traders from Ivory Coast and Ghana, which is likely to facilitate trade opportunities for local farmers.

    2. Consultative Process

    In connection with the proposal submitted to MCC, the GoBF conducted a robust consultative process in May and June of 2006, building on the success and lessons learned from the process used to prepare its Poverty Reduction Strategy Paper. The GoBF also engaged the media to inform the public about the proposal for MCA assistance with a series of press releases, television interviews and press conferences. Consultations took place in all thirteen regions of the country and included representatives of civil society, the private sector, traditional authorities, farmers' and women's groups and local GoBF officials. Of the 3,115 participants, 87 percent came from civil society, and 18 percent were women. Overwhelmingly, input focused on improving the rural economy including ways to secure land tenure, intensify and modernize agricultural production, and improve the road network. Following the consultations, the GoBF distributed a summary document to partners in civil society and the donor community that resulted, after further revisions, in the proposal for funding submitted to MCC in October 2006. The Compact is designed specifically to address the core constraints to economic growth identified during the consultative process.
    3. GoBF Commitment and Contribution to Development of the Compact

    The GoBF has demonstrated substantial commitment to the Compact development process since becoming eligible for MCA assistance in November 2005. In February 2006, the GoBF carefully followed MCC guidance and established a fulltime compact development unit at an operational cost of $3.11 million. It financed an extensive consultation process throughout the country's 13 regions, at a total cost of $0.33 million, and commissioned a $2.36 million set of feasibility studies for the Roads Project. In setting up the accountable entity, the GoBF hired a recruitment firm to undertake the recruitment process for the key directors, at a cost of $64,000. The estimated monetary value of these contributions together is $5.86 million. For a country with a 2006 GNI per capita of $460, this contribution demonstrates the high national priority placed on the successful negotiation and implementation of this Compact. GoBF also has demonstrated its commitment through its effort to maintain eligibility on MCC indicators, and through its decision to establish the accountable entity under the auspices of the Office of the Prime Minister. In addition, the GoBF has committed to funding access roads and health infrastructure in the Sourou Valley agricultural zone as a complementary investment to MCCfinanced activities.
    4. Sustainability
    (a) Rural Land Governance Project. The foundation of this Project is a reformed legal, policy and procedural framework for land tenure, which will ensure an enabling environment for sustainability of the MCC investment. All sitespecific subactivities will be based on new legal frameworks, ensuring their support in law. Most of the Project's site specific interventions will be scalable through the phased approach, thus enabling the expected returns on an initial share of the investment to be tested before the Project is expanded. By requiring that phase two be based on demonstrated performance, the Project design stands as an innovative approach to ensuring results and investment sustainability. All training and equipment investments, particularly those associated with strengthening regional and provincial registration and mapping services, will be designed specifically for the Burkina Faso context.
    (b) Agriculture Development Project. The overall sustainability of the Project lies with: (i) The strengthened capacity of the Direction G[eacute]n[eacute]rale des Ressources en Eau (``DGRE'') to better manage and maintain water storage in the Sourou reservoir; (ii) the strengthened capacity of the Autorit[eacute] de Mise en Valeur du Sourou (``AMVS'') within the Ministry of Agriculture, through its operation and maintenance contractors to provide a
    [[Page 42605]]
    reliable supply of water to farmers as specified in the bylaws of the project (Cahier de Charges); (iii) the capacity of beneficiaries, through their water user associations (``WUA'') to pay for operations and maintenance to ensure the provision of irrigation water; (iv) the establishment of an operations and maintenance fund managed and overseen by AMVS and the WUAs; and (v) the GoBF to ensure that the Cahier de Charges is respected by the parties to it. Disbursement of MCC funding will depend on the GoBF strengthening capacity to MCC's satisfaction.
    (c) Roads Project. Road maintenance is crucial for the longterm functioning of the Roads Project investment. The continuation of efforts to mobilize resources for road maintenance is essential to ensure sustainability of the road investments. The provision by MCC of matching funds to annual increases in GoBF spending on periodic (major) maintenance is an innovative mechanism to ensure roads are adequately maintained and an adequate longterm road maintenance system is in place.
    (d) BRIGHT 2 Schools Project. The sustainability of MCC investments in this Project is contingent upon the GoBF providing trained teachers and school books for 396 classrooms. The GoBF has committed to providing these teachers and books and met similar requirements during the threshold phase. In addition, the GoBF will be obligated to nominate a BRIGHT 2 Schools Project coordinator and coordination team, and to provide an annual budget allocation to the Ministry of Basic Education and Literacy for teacher salaries and other recurrent costs for the existing 132 BRIGHT schools (including classrooms and other facilities funded under the BRIGHT 2 Schools Project).

    5. Environment and Social Impacts

    MCC will require that all Projects comply with national laws and regulations, MCC's environmental guidelines and gender policy, and the World Bank's Operational Policy on Involuntary Resettlement (``OP 4.12''). None of the Projects is likely to generate significant adverse environmental, health, or safety impacts, and all expected impacts can be mitigated. The environmental and social sustainability of the Compact will be enhanced through oversight, ongoing public consultation, and institutional capacity building.

    The Rural Land Governance Project is classified as Category B under MCC's environmental guidelines due to potential sitespecific environmental and social impacts anticipated to result from the construction of municipal buildings and fieldlevel activities clarifying local land uses and land rights. While these impacts are not anticipated to be significant in nature, they will require mitigation through implementation of measures identified in an Environmental and Social Management Framework. Resettlement Action Plans (``RAPs'') also will be developed to adequately plan for and mitigate the resettlement impacts at building sites.

    The Agriculture Development Project is classified as Category A under MCC's environmental guidelines due to largescale agriculture development activities involving intensification or conversion of natural habitats, with potential for significant impacts on sensitive locations as well as the potential for increased use of pesticides and increased surface water pollution. Given the potential for these significant social and environmental impacts, detailed assessments and mitigation plans will be required, including an environmental impact assessment (``EIA'') and RAP for the water management and irrigation activities, and EIAs for the agricultural activities.

    The Roads Project is classified as Category B under MCC's environmental guidelines as the potential environmental and social impacts related to upgrading and rehabilitating existing roads and supporting road maintenance are likely to be sitespecific and mitigable. As a result, EIAs will be completed for each set of roads to be rehabilitated or upgraded, and each EIA will include gender analysis, environmental management plans and HIV/AIDS prevention plans.

    For the BRIGHT 2 Schools Project, MCC and USAID have agreed that USAID Regulation 216 will be followed in lieu of MCC's Environmental Guidelines and Gender Policy.

    6. Donor, Multilateral, and Interagency Coordination

    MCC has consulted extensively on each of the proposed Projects with the major donors in Burkina Faso, including, the World Bank, the European Union (``EU''), the French Development Agency (Agence Fran[ccedil]aise de D[eacute]veloppement, or ``AFD''), the Danish International Development Agency (``DANIDA''), the German Agency for Technical Cooperation (Deutsche Gesellschaft f[uuml]r Technische Zusammenarbeit GmbH, or ``GTZ''), the Austrian Development Corporation, the Luxembourg Agency for Development Cooperation, the International Fund for Agricultural Development (``IFAD''), the International Finance Corporation (``IFC''), the African Development Bank (``AfDB''), the United Nations Food and Agriculture Organization (``FAO''), the Swedish International Development Agency (``SIDA''), the United Nations Development Program (``UNDP''), and USAID.

    In several cases, MCCfunded activities complement or directly build on initiatives by other donors. For example, as part of the Agriculture Development Project, the market information system will continue work begun under a USAID project, and the improvements to district markets will draw on the experience of the Swiss Development Agency. Synergies will also be gained in the implementation of the Access to Rural Finance activity through close coordination with the IFC's micro, small and mediumsized enterprise credit program, the World Bank's Projet d'Appui aux Fili[egrave]res AgroSylvoPastoral Project (``PAFASP''), and the World Bank and EUfunded Maison de l'Enterprise which provides business support services.

    In addition, technical assistance under the Roads Project has been structured to complement ongoing technical assistance programs, to build on the World Bank's assistance that resulted in the establishment of the Road Fund, and to strengthen work initiated by the AfDB and the EU on road maintenance. Design of the Incentive Matching Fund for Periodic Maintenance (``IMFP''), in particular, was developed in collaboration with the World Bank and the EU.

    Finally, the BRIGHT 2 Schools Project, to be administered by USAID, is a model of interagency coordination and the first time MCC and USAID have partnered directly in connection with the implementation of a compactfunded project.
    Millennium Challenge Compact Between the United States of America Acting Through the Millennium Challenge Corporation and the Government of Burkina Faso
    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 on the Use of MCC Funding

    Section 2.8 Taxes
    Article 3. Implementation
    [[Page 42606]]

    Section 3.1 Program Implementation Agreement

    Section 3.2 Government Responsibilities

    Section 3.3 Policy Performance

    Section 3.4 Government Assurances

    Section 3.5 Implementation Letters

    Section 3.6 Procurement

    Section 3.7 Records; Accounting; Covered Providers; Access

    Section 3.8 Audits; Reviews
    Article 4. Communications

    Section 4.1 Communications

    Section 4.2 Representatives

    Section 4.3 Signatures
    Article 5. Termination; Suspension; Refunds

    Section 5.1 Termination; Suspension

    Section 5.2 Refunds; Violation

    Section 5.3 Survival
    Article 6. Compact Annexes; Amendments; Governing Law

    Section 6.1 Annexes

    Section 6.2 Amendments

    Section 6.3 Inconsistencies

    Section 6.4 Governing Law

    Section 6.5 Additional Instruments

    Section 6.6 References to MCC Web site

    Section 6.7 References to Laws, Regulations, Policies and Guidelines

    Section 6.8 MCC Status
    Article 7. Entry Into Force

    Section 7.1 Domestic Requirements

    Section 7.2 Conditions Precedent to Entry into Force

    Section 7.3 Date of Entry into Force

    Section 7.4 Compact Term

    Section 7.5 Provisional Application
    Annex I: Program Description
    Annex II: Summary of the MultiYear Financial Plan
    Annex III: Description of the Monitoring and Evaluation Plan Annex IV: Conditions to CIF Disbursement
    Millennium Challenge Compact

    Preamble

    This Millennium Challenge Compact (this ``Compact'') is between the United States of America, acting through the Millennium Challenge Corporation, a United States government corporation (``MCC''), and the Government of Burkina Faso (the ``Government'') (individually, each of MCC and the Government, a ``Party,'' and collectively, the ``Parties'').

    Recalling that the Government consulted with the private sector and civil society of Burkina Faso to determine the priorities for the use of Millennium Challenge Account assistance and developed and submitted to MCC a proposal for such assistance; and

    Recognizing that MCC wishes to help Burkina Faso implement a program to achieve the Compact Goal and Project Objectives described herein (the ``Program''),

    The Parties hereby agree as follows:
    Article 1. Goal and Objectives

    Section 1.1 Compact Goal

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

    Section 1.2 Project Objective

    The objectives of the Projects (as further described in Annex I) (each, a ``Project Objective'') are:
    (a) To increase investment in land and rural productivity through improved land tenure security and land management;
    (b) To expand the productive use of land in order to increase the volume and value of agricultural production in Project zones; (c) To enhance access to markets through investments in the road network; and
    (d) To increase primary school completion rates for girls. Article 2. Funding and Resources

    Section 2.1 Program Funding

    MCC hereby grants to the Government, under the terms of this Compact, an amount not to exceed Four Hundred SixtyFour Million Eight Hundred FortyTwo Thousand Five Hundred and Four United States Dollars (US$464,842,504) (``Program Funding'') for use by the Government to implement the Program. The allocation of Program Funding uses is generally described in Annex II to this Compact.
    Section 2.2 Compact Implementation Funding
    (a) MCC hereby grants to the Government, under the terms of this Compact, in addition to the Program Funding described in Section 2.1, an amount not to exceed Sixteen Million One Hundred One Thousand and SixtyFive United States Dollars (US$16,101,065) (``Compact Implementation Funding'' or ``CIF'') under Section 609(g) of the Millennium Challenge Act of 2003, as amended (the ``MCA Act''), for use by the Government for the following purposes:
    (i) Feasibility and design studies, strategic environmental (and social) assessments, environmental impact assessments, environmental assessments, environmental management plans and resettlement action plans for projects and activities included in the Program;
    (ii) Financial management and procurement activities;
    (iii) Monitoring and evaluation activities;
    (iv) Administration activities, including salaries, benefits, and administrative support expenses such as rent, information technology, and other capital expenditures; and
    (v) Other Compact implementation activities approved by MCC.

    The allocation of Compact Implementation Funding uses is generally described in Annex II to this Compact.
    (b) Notwithstanding the provisions of Section 7.3 of this Compact, this Section 2.2, together with any other provisions of this Compact applicable to Compact Implementation Funding, shall be effective 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 to such Disbursement as set forth in Annex IV.
    (d) If MCC determines that the full amount of Compact
    Implementation Funding under Section 2.2(a) of this Compact exceeds the amount which reasonably can be utilized for the purposes and uses set forth in Section 2.2(a) of this Compact within one year after this Compact enters into force, MCC, by written notice to the Government, may withdraw the excess amount, thereby reducing the amount of the Compact Implementation Funding as set forth in Section 2.2(a) (such excess, the ``Excess CIF Amount''). In such event, the amount of Compact Implementation Funding granted to the Government under Section 2.2(a) will be reduced by the Excess CIF Amount, and MCC will have no further obligations with respect to such Excess CIF Amount. (e) MCC, at MCC's option by written notice to the Government, may elect to grant to the Government an amount equal to all or a portion of such Excess CIF Amount as an increase in the Program Funding, and such additional Program Funding will be subject to the terms and conditions of this Compact applicable to Program Funding.

    Section 2.3 MCC Funding

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

    Section 2.4 Disbursement

    In accordance with this Compact and the Program Implementation Agreement, MCC will disburse MCC Funding for expenditures incurred in furtherance of the Program (each instance, a ``Disbursement''). Subject to the satisfaction of all applicable conditions, the proceeds of such Disbursements will be made available to the Government, at MCC's sole election, by (a) deposit to one or more bank
    [[Page 42607]]
    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 in connection with the implementation of the Program. MCC Funding may be expended only to cover Program expenditures as provided in this Compact and the Program Implementation Agreement.

    Section 2.5 Interest

    The Government will pay to MCC any interest or other earnings that accrue on MCC Funding in accordance with the Program Implementation Agreement (whether by directing such payments to a bank account outside Burkina Faso that MCC may from time to time indicate or as otherwise directed by MCC).
    Section 2.6 Government Resources; Budget
    (a) The Government will provide all funds and other resources, and will take all actions, that are necessary to carry out the Government's responsibilities and obligations under this Compact.
    (b) The Government will 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 multiyear basis.
    (c) The Government will not reduce the normal and expected resources that it would otherwise receive or budget from sources other than MCC for the activities contemplated under this Compact and the Program.
    (d) Unless the Government discloses otherwise to MCC in writing, MCC Funding will be in addition to the resources that the Government would otherwise receive or budget for the activities contemplated under this Compact and the Program.

    Section 2.7 Limitations on the Use of MCC Funding

    The Government will ensure that MCC Funding will not be used for any purpose that would violate United States law or policy, as specified in this Compact or as further notified to the Government in writing or by posting from time to time on the MCC Web site at 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 quasimilitary organization or unit; (b) For any activity that is likely to cause a substantial loss of United States jobs or a substantial displacement of United States production;
    (c) To undertake, fund or otherwise support any activity that is likely to cause a significant environmental, health, or safety hazard, as further described in MCC's Environmental Guidelines posted from time to time on the MCC Web site (the ``MCC Environmental Guidelines''); or (d) To pay for the performance of abortions as a method of family planning or to motivate or coerce any person to practice abortions, to pay for the performance of involuntary sterilizations as a method of family planning or to coerce or provide any financial incentive to any person to undergo sterilizations or to pay for any biomedical research which relates, in whole or in part, to methods of, or the performance of, abortions or involuntary sterilization as a means of family planning.
    Section 2.8 Taxes
    (a) Unless the Parties otherwise specifically agree in writing, and subject to the provisions of Sections 2.8(b)(ii) and (iii) and 2.8(c), the Government will ensure that each of the following is free from the payment of any existing or future taxes, duties, levies, contributions or other similar charges (``Taxes'') of or in Burkina Faso (including any such Taxes imposed by a national, regional, local or other governmental or taxing authority of or in Burkina Faso): (i) The Program; (ii) MCC Funding; (iii) interest or earnings on MCC Funding; (iv) any Project or activity implemented under the Program; (v) the Accountable Entity (as defined below); (vi) goods, works, services, technology and other assets and activities under the Program or any Project; (vii) persons and entities that provide such goods, works, services, technology and assets or perform such activities; and (viii) income, profits and payments with respect thereto. The Parties acknowledge and agree that the foregoing includes, inter alia, value added and other transfer taxes, profit and income taxes, property and ad valorem taxes, import and export duties and taxes (including for goods imported and reexported for personal use), withholding taxes, payroll taxes, and social security and social insurance contributions. (b) The Government and MCC may, at MCC's discretion, enter into one or more agreements setting forth the mechanisms for implementing this Section 2.8, including, but not limited to (i) waivers of certain filing and compliance requirements relating to Taxes; (ii) an agreement on exceptions to Section 2.8(a) above for fees or charges for services that are generally applicable in Burkina Faso, reasonable in amount and imposed on a nondiscriminatory basis; and (iii) one or more mechanisms to implement the provisions of Section 2.8(a) with respect to all or any of the Taxes that would otherwise be applicable, which may include exemptions from payment of such Taxes that have been granted in accordance with applicable law, refund or reimbursement of such Taxes by the Government to MCC or to the taxpayer, or payment by the Government to the Accountable Entity or MCC, for the benefit of the Program, an agreed amount in respect of any Taxes collected on the items described in Section 2.8(a).
    (c) Unless otherwise specified in an agreement entered into pursuant to Section 2.8(b), the provisions of Section 2.8(a) shall not apply to income Taxes on and contributions with respect to individuals who are nationals of Burkina Faso; provided, that such Taxes and contributions are not discriminatory and are generally applicable to all nationals in Burkina Faso; and provided, further, that in any event Section 2.8(a) shall apply to Millennium Challenge AccountBurkina Faso, an independent entity established under the office of the Prime Minister by Decree No. 2008185/PRES/PM dated April 18, 2008 (``MCA Burkina Faso''), or any other entity established by the Government solely for purposes of managing or overseeing implementation of the Program (MCABurkina Faso and any such other entity, each, an ``Accountable Entity'').
    (d) If a Tax has been paid contrary to the requirements of this Section 2.8 or any agreement entered into pursuant to this Section 2.8, the Government will refund promptly to MCC (or to another party as designated by MCC) the amount of such Tax in United States Dollars (``US$'') or CFA Francs (as elected by MCC) 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 otherwise) that such Tax has been paid.
    (e) No MCC Funding, proceeds thereof or Program assets may be applied by the Government in satisfaction of its obligations under this Section 2.8.
    Article 3. Implementation

    Section 3.1 Program Implementation Agreement

    The Government will implement the Program in accordance with this Compact and as further specified in an agreement to be entered into by MCC,
    [[Page 42608]]
    the Government and the Accountable Entity and relating to, among other matters, implementation arrangements, fiscal accountability and disbursement and use of MCC Funding (the ``Program Implementation Agreement'' or ``PIA'').
    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 implement some or all of the Government's obligations or to exercise any rights of the Government under this Compact or the Program Implementation Agreement. Such a designation will not relieve the Government of any designated obligations and rights, for which the Government will retain full responsibility. (c) The Government will ensure that no law or regulation in Burkina Faso now or hereinafter in effect makes or will make unlawful or otherwise prevent or hinder the performance of any of the Government's obligations under this Compact, the Program Implementation Agreement or any other related agreement or any transaction contemplated hereby or thereby.
    (d) The Government will ensure that any assets or services funded in whole or in part (directly or indirectly) by MCC Funding will be used solely in furtherance of this Compact and the Program unless otherwise agreed by MCC in writing.
    (e) The Government will take all necessary or appropriate steps to achieve the Compact Goal and the Project Objectives during the Compact Term (as defined in Section 7.4).

    Section 3.3 Policy Performance

    In addition to undertaking the specific policy, legal and regulatory reform commitments identified in Annex I (if any), the Government will seek to maintain and to improve its level of performance under the policy criteria identified in Section 607 of the MCA Act, and the selection criteria and methodology used by MCC. Section 3.4 Government Assurances

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

    Section 3.5 Implementation Letters

    From time to time, MCC may provide guidance to the Government in writing on any matters relating to this Compact, MCC Funding, or implementation of the Program (each, an ``Implementation Letter''). The Government will apply such guidance in implementing the Program. Section 3.6 Procurement

    The Government will ensure that the procurement of all goods, works and services by the Government or any Provider (as defined in Section 3.7(c)) to implement the Program will be consistent with the program procurement guidelines posted from time to time on the MCC Web site (the ``MCC Program Procurement Guidelines''). The MCC Program Procurement Guidelines will include, among others, the following requirements:
    (a) Open, fair, and competitive procedures must be used in a transparent manner to solicit, award and administer contracts and to procure goods, works and services;
    (b) Solicitations for goods, works and services must be based upon a clear and accurate description of the goods, works and services to be acquired;
    (c) Contracts must be awarded only to qualified contractors that have the capability and willingness to perform the contracts in accordance with their terms on a cost effective and timely basis; and (d) No more than a commercially reasonable price, as determined, for example, by a comparison of price quotations and market prices, will be paid to procure goods, works and services.
    Section 3.7 Records; Accounting; Covered Providers; Access
    (a) Government Books and Records. The Government will maintain, and will use its best efforts to ensure that all Covered Providers (as defined in Section 3.7(c)) maintain, accounting books, records, documents and other evidence relating to the Program adequate to show to MCC's satisfaction the use of all MCC Funding (``Compact Records''). In addition, the Government will furnish or cause to be furnished to MCC, upon its request, all such Compact Records.
    (b) Accounting. The Government will maintain, and will use its best efforts to ensure that all Covered Providers maintain, Compact Records in accordance with generally accepted accounting principles prevailing in the United States, or at the Government's option and with MCC's prior written approval, other accounting principles, such as those (i) prescribed by the International Accounting Standards Board, or (ii) then prevailing in Burkina Faso. Compact Records must be maintained for at least five (5) years after the end of the Compact Term or for such longer period, if any, required to resolve any litigation, claims or audit findings or any statutory requirements.
    (c) Providers and Covered Providers. Unless the Parties agree otherwise in writing, a ``Provider'' is (i) any entity of the Government that receives or uses MCC Funding or any other Program asset in carrying out activities in furtherance of this Compact, or (ii) any third party that receives at least 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 nonUnited States Provider that receives (other than pursuant to a direct contract or agreement with MCC) US$300,000 or more of MCC Funding in any Government fiscal year or any other non United States person or entity that receives, directly or indirectly, US$300,000 or more of MCC Funding from any Provider in such fiscal year, or (ii) any United States Provider that receives (other than pursuant to a direct contract or agreement with MCC) US$500,000 or more of MCC Funding in any Government fiscal year or any other United States person or entity that receives, directly or indirectly, US$500,000 or more of MCC Funding from any Provider in such fiscal year.
    (d) Access. Upon MCC's request, the Government, at all reasonable times, will permit, or cause to be permitted, authorized
    representatives of MCC, an authorized United States inspector general, the United States Government Accountability Office, any auditor responsible for an audit contemplated herein or otherwise conducted in furtherance of this Compact, and any agents or representatives engaged by MCC or the Government to conduct any assessment, review or evaluation of the Program, the opportunity to audit, review, evaluate or inspect facilities and activities funded in whole or in part by MCC Funding.
    [[Page 42609]]
    Section 3.8 Audits; Reviews
    (a) Government Audits. Except as the Parties may otherwise agree in writing, the Government will, on at least a semiannual basis, conduct, or cause to be conducted, financial audits of all disbursements of MCC Funding covering the period from signing of this Compact until the earlier of the following December 31 or June 30 and covering each six month period thereafter ending December 31 and June 30, through the end of the Compact Term, in accordance with the terms of the Program Implementation Agreement. In addition, upon MCC's request, the Government will ensure that such audits are conducted by an independent auditor approved by MCC and named on the list of local auditors approved by the Inspector General of MCC (the ``Inspector General'') or a United Statesbased certified public accounting firm selected in accordance with the Guidelines for Financial Audits Contracted by MCA (the ``Audit Guidelines'') issued and revised from time to time by the Inspector General, which are posted on the MCC Web site. Audits will be performed in accordance with the Audit Guidelines and be subject to quality assurance oversight by the Inspector General. Each audit must be completed and the audit report delivered to MCC no later than 90 days after the first period to be audited and no later than 90 days after each June 30 and December 31 thereafter, or such other period as the Parties may otherwise agree in writing.
    (b) Audits of United States Entities. The Government will ensure that agreements between the Government or any Provider, on the one hand, and a United States nonprofit organization, on the other hand, that are financed with MCC Funding state that the United States nonprofit organization is subject to the applicable audit requirements contained in OMB Circular A133 issued by the United States Government Office of Management and Budget (``OMB''). The Government will ensure that agreements between the Government or any Provider, on the one hand, and a United States forprofit Covered Provider, on the other hand, that are financed with MCC Funding state that the United States forprofit organization is subject to audit by the applicable United States Government agency, unless the Government and MCC agree otherwise in writing.
    (c) Corrective Actions. The Government will use its best efforts to ensure that Covered Providers take, where necessary, appropriate and timely corrective actions in response to audits, consider whether a Covered Provider's audit necessitates adjustment of the Government's records, and require each such Covered Provider to permit independent auditors to have access to its records and financial statements as necessary.
    (d) Audit by MCC. MCC will have the right to arrange for audits of the Government's use of MCC Funding.
    (e) Cost of Audits, Reviews or Evaluations. MCC Funding may be used to fund the costs of any audits, reviews or evaluations required under this Compact.
    Article 4. Communications

    Section 4.1 Communications

    Any document or communication required or submitted by either Party to the other under this Compact must be in writing and, except as otherwise agreed with MCC, in English. For this purpose, the address of each Party is set forth below.

    To MCC:

    Millennium Challenge Corporation, Attention: (a) Before this Compact enters into force, Vice President, Compact Development; and (b) after this Compact enters into force, Vice President, Compact Implementation, (in each case, with a copy to the Vice President and General Counsel), 875 Fifteenth Street, NW., Washington, DC 20005, United States of America, Facsimile: (202) 5213700, Telephone: (202) 5213600, Email: VPDevelopment@mcc.gov (Vice President, Compact Development), VPImplementation@mcc.gov (Vice President, Compact Implementation), VPGeneralCounsel@mcc.gov (Vice President and General Counsel).

    To the Government:

    Minist[egrave]re de l'Economie et des Finances, Attention: Minister of Economy and Finance, Ministre de l'Economie et des Finances, Avenue du G[eacute]n[eacute]ral Bila Jean G[eacute]rard ZAGRE, 01 BP: 7012 Ouagadougou 01, Burkina Faso, Facsimile: +226 50 31 27 15, Telephone: 226 50 32 42 11.

    Section 4.2 Representatives

    For all purposes of this Compact, the Government will be represented by the individual holding the position of, or acting as, the Minister of Economy and Finance, and MCC will be represented by (a) before this Compact enters into force, the individual holding the position of, or acting as, Vice President, Compact Development, and (b) after this Compact enters into force, the individual holding the position of, or acting as, Vice President, Compact Implementation (each of the foregoing, a ``Principal Representative''). Each Party, by written notice to the other Party, may designate one or more additional representatives for all purposes other than signing amendments to this Compact. A Party may change its Principal Representative to a new representative that holds a position of equal or higher rank upon written notice to the other Party.

    Section 4.3 Signatures

    With respect to all documents other than this Compact or an amendment to this Compact, a signature delivered by facsimile or electronic mail will be binding on the Party delivering such signature to the same extent as an original signature would be.
    Article 5. Termination; Suspension; Refunds
    Section 5.1 Termination; Suspension
    (a) Either Party may terminate this Compact in its entirety by giving the other Party thirty (30) days' written notice.
    (b) MCC may, immediately, upon written notice to the Government, suspend or terminate this Compact or MCC Funding, in whole or in part, and any obligation related thereto, if MCC determines that any circumstance identified by MCC as a basis for suspension or termination (whether in writing to the Government or by posting on the MCC Web site) has occurred, which circumstances include but are not limited to the following:
    (i) The Government fails to comply with its obligations under this Compact, the Program Implementation Agreement or any other agreement or arrangement entered into by the Government in connection with this Compact or the Program;
    (ii) An event or series of events has occurred that MCC determines makes it probable that 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 the Program violates or would violate applicable law or United States Government policy, whether now or hereafter in effect;
    (iv) The Government or any other person or entity receiving MCC Funding or using assets acquired in whole or in part with MCC Funding is engaged in activities that are contrary to the national security interests of the United States;
    (v) An act has been committed or an omission or an event has occurred that
    [[Page 42610]]
    would render Burkina Faso ineligible to receive United States economic assistance under Part I of the Foreign Assistance Act of 1961, as amended (22 U.S.C. 2151 et seq.), by reason of the application of any provision of the Foreign Assistance Act of 1961 or any other provision of law;
    (vi) The Government has engaged in a pattern of actions inconsistent with the criteria used to determine the eligibility of Burkina Faso for assistance under the MCA Act; and
    (vii) The Government or another person or entity receiving MCC Funding or using assets acquired in whole or in part with MCC Funding is found to have been convicted of a narcotics offense or to have been engaged in drug trafficking.
    (c) All Disbursements will cease upon expiration, suspension, or termination of this Compact; provided, however, MCC Funding may be used, in compliance with this Compact and the Program Implementation Agreement, to pay for (i) reasonable expenditures for goods, works or services that are properly incurred under or in furtherance of the Program before expiration, suspension or termination of this Compact, and (ii) reasonable expenditures (including administrative expenses) properly incurred in connection with the winding up of the Program within 120 days after the expiration, suspension or termination of this Compact, so long as the request for such expenditures is submitted within ninety (90) days after such expiration, suspension or termination.
    (d) Subject to Section 5.1(c), upon the expiration, suspension or termination of this Compact, (i) any amounts of MCC Funding not disbursed by MCC to the Government will be automatically released from any obligation in connection with this Compact, and (ii) any amounts of MCC Funding disbursed by MCC but not expended under Section 2.4 before the expiration, suspension or termination of this Compact, plus accrued interest thereon will be returned to MCC within thirty (30) days after the Government receives MCC's request for such return; provided, however, that if this Compact is suspended or terminated in part, MCC may request a refund for only the amount of MCC Funding allocated to the suspended or terminated portion.
    (e) MCC may reinstate any suspended or terminated MCC Funding under this Compact if MCC determines that the Government or other relevant person or entity has committed to correct each condition for which MCC Funding was suspended or terminated.
    Section 5.2 Refunds; Violation
    (a) If any MCC Funding, any interest or earnings thereon, or any asset acquired in whole or in part with MCC Funding is used for any purpose in violation of the terms of this Compact, then MCC may require the Government to repay to MCC in United States Dollars the value of the misused MCC Funding, interest, earnings, or asset, plus interest within thirty (30) days after the Government's receipt of MCC's request for repayment. The Government will not use MCC Funding, proceeds thereof or Program assets to make such payment.
    (b) Notwithstanding any other provision in this Compact or any other agreement to the contrary, MCC's right under this Section 5.2 for a refund will continue during the Compact Term and for a period of (i) five years thereafter, or (ii) one year after MCC receives actual knowledge of such violation, whichever is later.

    Section 5.3 Survival

    The Government's responsibilities under Sections 2.5, 2.6, 2.7, 2.8, 3.7, 3.8, 5.1(c), 5.1(d), 5.2, 5.3 and 6.4 of this Compact will survive the expiration, suspension or termination of this Compact. Article 6. Compact Annexes; Amendments; Governing Law

    Section 6.1 Annexes

    Each annex to this Compact constitutes an i

    SUMMARY:

    Entering into a Compact with the Government of Burkina Faso,