TREATIES AND OTHER INTERNATIONAL ACTS SERIES 10-901 

________________________________________________________________________ 

ECONOMIC ASSISTANCE 

 Millennium Challenge Compact 

 Between the 

UNITED STATES OF AMERICA 

and MOLDOVA 

Signed at Washington January 22, 2010 

with 

Annexes 
 NOTE BY THE DEPARTMENT OF STATE 

 Pursuant to Public Law 89—497, approved July 8, 1966 

(80 Stat. 271; 1 U.S.C. 113)—

“. . .the Treaties and Other International Acts Series issued 

under the authority of the Secretary of State shall be competent 

 evidence . . . of the treaties, international agreements other than 

treaties, and proclamations by the President of such treaties and 

international agreements other than treaties, as the case may be, 

therein contained, in all the courts of law and equity and of maritime 

jurisdiction, and in all the tribunals and public offices of the 

United States, and of the several States, without any further proof 

or authentication thereof.” 
MOLDOVA 

Economic Assistance 

 Millennium Challenge Compact 

 signed at Washington January 22, 2010; 

 Entered into force September 1, 2010. 

 With annexes. 
MILLENNIUM CHALLENGE COMPACT

BETWEEN

THE UNITED STATES OF AMERICA

ACTING THROUGH

THE MILLENNIUM CHALLENGE CORPORATION

AND

THE REPUBLIC OF MOLDOVA
MILLENNIUM CHALLENGE COMPACT

TABLE OF CONTENTS

Page

Article I. Goal and Objectives 1

Section 1.1 Compact Goal 1

Section 1.2 Program Objective 1

Section 1.3 Project Objectives 1

Article 2. Funding and Resources 2

Section 2.1

Section 2.2

Section 2.3

Section 2.4

Section 2.5

Section 2.6

Section 2.7

Section 2.8

Program Funding 2

Compact Implementation Funding 2

MCC Funding 3

Disbursement 3

Interest 3

Government Resources; Budget 3

Limitations on the Use of MCC Funding 3

Taxes 4

Article 3. Implementation 6

Section 3.1

Section 3.2

Section 3.3

Section 3.4

Section 3.5

Section 3.6

Section 3.7

Section 3.8

Program Implementation Agreement 6

Government Responsibilities 6

Policy Performance 7

Government Assurances 7

Implementation Letters 7

Procurement 7

Records; Accounting; Covered Providers; Access 8

Audits; Reviews 9

Article 4. Communications 10

Section 4.1 Communications 10

Section 4.2 Representatives 10

Section 4.3 Signatures 11

Article 5. Termination; Suspension; Refunds 11

Section 5.1 Termination; Suspension 11

Section 5.2 Refunds; Violation 12

Section 5.3 Survival 13

Article 6. Compact Annexes; Amendments; Governing Law 13

Section 6.1 Annexes 13

Section 6.2 Amendments 13

Section 6.3 Inconsistencies 13

Section 6.4 Governing Law 14
Section 6.5 Additional Instruments 14

Section 6.6 References to MCC Website 14

Section 6.7 References to Laws, Regulations, Policies and Guidelines 14

Section 6.8 MCC Status 14

Section 6.9 Counterparts; Electronic Delivery 14

Article 7. Entry Into Force 15

Section 7.1 Domestic Requirements 15

Section 7.2 Conditions Precedent to Entry into Force 15

Section 7.3 Date of Entry into Force 15

Section 7.4 Compact Term 15

Section 7.5 Provisional Application 15

Annex I: Program Description

Annex II: Multi-Year Financial Plan Summary

Annex III: Description of the Monitoring and Evaluation Plan

Annex IV: Conditions to Disbursement of Compact Implementation Funding

Annex V: Definitions

Annex VI: Specific Tax Exemption Mechanisms

Schedule A — Value Added Tax (VAT)

Schedule B — Customs Duties

Schedule C — Corporate Income Tax

Schedule D — Individual Income Tax

Schedule E — Taxation of Petroleum Products

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

Schedule G — Excise Duty

Schedule H — Customs Procedure Tax

Schedule I — Other Taxes

Toc -
MILLENNIUM CHALLENGE COMPACT

PREAMBLE

This MILLENNIUM CHALLENGE COMPACT (this "Compact") is between the United States

of America, acting through the Millennium Challenge Corporation, a United States government

corporation ("MCC"), and the Republic of Moldova ("Moldova"), acting through its government

(the "Government").

MCC and the Government are individually referred to in this Compact as a "Party" and together,

as the "Parties." Capitalized terms used in this Compact will have the meanings specified in

Annex V hereto.

Recalling that the Government consulted with the private sector and civil society of Moldova to

determine the priorities for the use of Millennium Challenge Account assistance and developed

and submitted to MCC a proposal for such assistance to achieve lasting economic growth and

poverty reduction; and

Recognizing that MCC wishes to help Moldova implement a program to achieve the goal and

objectives described herein (the "Program").

The Parties agree as follows:

ARTICLE 1.

GOAL AND OBJECTIVES

Section 1.1 Compact Goal. The goal of this Compact is to reduce poverty through economic

growth in Moldova (the "Compact Goal").

Section 1.2 Program Objective. The objective of the Program is to increase incomes through

increased agricultural productivity and expanded access to markets and services through

improved roads (as further described in Annex I, the "Program Objective").

Section 1.3 Project Objectives. The objectives of the Projects (as further described in

Annex I) (each a "Project Objective" and collectively, the "Project Objectives") are as follows:

(a) The objectives of the Transition to High Value Agriculture Project (as defined in

Annex I) are to: (i) increase rural incomes by stimulating growth in irrigated high value

agriculture; and (ii) catalyze future investments in high value agriculture by establishing a

successful and sustainable model of irrigation system and water resource management and a

conducive institutional and policy environment for irrigated agriculture.

(b) The objectives of the Road Rehabilitation Project (as defined in Annex I) are to:

(i) increase incomes of the local population by reducing the cost of transport, goods and services;

(ii) reduce losses to the national economy resulting from deteriorated road conditions; and (iii)

reduce the number of road accidents through improved traffic conditions.
ARTICLE 2.

FUNDING AND RESOURCES

Section 2.1 Program Funding.

Upon entry into force of this Compact, MCC will grant to the Government, under the terms of

this Compact, an amount not to exceed Two Hundred and Fifty-Four Million United States

Dollars (US$254,000,000) to support the Program ("Program Funding"). The allocation of

Program Funding is generally described in Annex II to this Compact.

Section 2.2 Compact Implementation Funding.

(a) Upon signature of this Compact, MCC hereby grants to the Government, under

the terms of this Compact, in addition to the Program Funding described in Section 2.1, an

amount not to exceed Eight Million United States Dollars (US$8,000,000) ("Compact

Implementation Funding") under Section 609(g) of the Millennium Challenge Act of 2003, as

amended (the "MCA Act"), for use by the Government as agreed by the Parties, which may

include use for the following purposes:

(i) financial management and procurement activities; and

(ii) start-up activities, including staff salaries and administrative support

expenses, such as office equipment, computers and other information technology or capital

equipment; and other Compact implementation activities approved by MCC.

The allocation of Compact Implementation Funding is generally described in Annex II to this

Compact.

(b) In accordance with Section 7.5 of this Compact, this Section 2.2 and other

provisions of this Compact necessary to make use of Compact Implementation Funding for the

purposes set forth herein, will be effective, for purposes of Compact Implementation Funding

only, as of the date this Compact is signed by MCC and the Government.

(c) Each Disbursement of Compact Implementation Funding is subject to satisfaction

of the conditions to such disbursement as set forth in Annex IV.

(d) If, after the first anniversary of this Compact entering into force, MCC determines

that the full amount of Compact Implementation Funding under Section 2.2(a) of this Compact

exceeds the amount which reasonably can be utilized for the purposes and uses set forth in

Section 2.2(a) of this Compact, MCC, by written notice to the Government, may withdraw the

excess amount, thereby reducing the amount of the Compact Implementation Funding as set

forth in Section 2.2(a) (such excess, the "Excess CIF Amount"). In such event, the amount of

Compact Implementation Funding granted to the Government under Section 2.2(a) will be

reduced by the Excess CIF Amount, and MCC will have no further obligations with respect to

such Excess CIF Amount.

(e) MCC, at its option by written notice to the Government, may elect to grant to the

Government an amount equal to all or a portion of such Excess CIF Amount as an increase in the

Program Funding, and such additional Program Funding will be subject to the terms and

2
conditions of this Compact and any relevant supplemental agreement applicable to Program

Funding.

Section 2.3 MCC Funding.

Program Funding and Compact Implementation Funding are collectively referred to in this

Compact as "MCC Funding."

Section 2.4 Disbursement.

In accordance with this Compact and the Program Implementation Agreement, MCC will

disburse MCC Funding for expenditures incurred in furtherance of the Program (each instance, a

"Disbursement"). Subject to the satisfaction of all applicable conditions, the proceeds of such

Disbursements will be made available to the Government, at MCC's sole election, by (a) deposit

to one or more bank accounts established by the Government through MCA-Moldova and

acceptable to MCC (each, a "Permitted Account") or (b) direct payment to the relevant provider

of goods, works or services for the implementation of the Program. MCC Funding may be

expended only to fund Program expenditures as provided in this Compact and the Program

Implementation Agreement.

Section 2.5 Interest. Except as otherwise agreed by MCC, the Government will transfer to

MCC any interest or other earnings that accrue on MCC Funding (whether by directing such

payments to a bank account outside Moldova that MCC may from time to time indicate or as

otherwise directed by MCC).

Section 2.6 Government Resources; Budget.

(a) The Government will provide all funds and other resources, and will take all

actions, that are necessary to carry out the Government's responsibilities and obligations under

this Compact.

(b) The Government will provide suitable and adequate office space for MCAMoldova and the MCC resident country mission.

(c) The Government will use its best efforts to ensure that all MCC Funding it

receives or is projected to receive in each of its fiscal years is fully accounted for in its annual

budget on a multi-year basis.

(d) The Government will not reduce the normal and expected resources that it would

otherwise receive or budget from sources other than MCC for the activities contemplated under

this Compact and the Program.

(e) Unless the Government discloses otherwise to MCC in writing, MCC Funding

will be in addition to the resources that the Government would otherwise receive or budget for

the activities contemplated under this Compact and the Program.

Section 2.7 Limitations on the Use of MCC Funding. The Government will ensure that MCC

Funding (or any refunds or reimbursements of MCC Funding paid by the Government in

accordance with this Compact that MCC permits to be used in connection with the Program) will

not be used for any purpose that would violate United States law or policy, as specified in this

3
Compact or as further notified to the Government in writing or by posting from time to time on

the MCC website at www.mcc.gov (the "MCC Website"), including, but not limited to, the

following purposes:

(a) for assistance to, or training of, the military, police, militia, national guard or

other quasi-military organization or unit;

(b) for any activity that is likely to cause a substantial loss of United States jobs or a

substantial displacement of United States production;

(c) to undertake, fund or otherwise support any activity that is likely to cause a

significant environmental, health, or safety hazard, as further described in MCC's environmental

and social guidelines posted from time to time on the MCC Website or otherwise made available

to the Government by MCC (the "MCC Environmental Guidelines"); or

(d) to pay for the performance of abortions as a method of family planning or to

motivate or coerce any person to practice abortions, to pay for the performance of involuntary

sterilizations as a method of family planning or to coerce or provide any financial incentive to

any person to undergo sterilizations or to pay for any biomedical research which relates, in whole

or in part, to methods of, or the performance of, abortions or involuntary sterilization as a means

of family planning.

Section 2.8 Taxes.

(a) Unless the Parties otherwise specifically agree in writing, and subject to the

provisions of Sections 2.8(b) and 2.8(c), the Government will ensure that each of the following is

free from the payment or imposition of any existing or future taxes, duties, levies, contributions,

or other similar charges ("Taxes") of or in Moldova (including any such Taxes imposed by a

national, regional, local, or other governmental or taxing authority of or in Moldova) (i) the

Program; (ii) MCC Funding; (iii) interest or earnings on MCC Funding; (iv) any Project or

activity implemented under or in connection with the Program; (v) MCA-Moldova; (vi) goods

and other property, works, services, technology, and other assets and activities, whether

acquired, used or performed at any level or stage, under or in connection with the Program or

any Project; (vii) persons and entities that provide such goods and other property, works,

services, technology, and assets, or perform such activities; and (viii) income, profits, and

payments with respect thereto. The Parties acknowledge and agree that "Taxes" include, among

other things, value added and other transfer taxes (including exemption therefrom with credit),

profit and income taxes, property and ad valorem taxes, import and export duties and taxes

(including for goods imported and re-exported for personal use), withholding taxes, payroll

taxes, social security and mandatory medical insurance contributions, road taxes and various

applicable local taxes (such as, but not limited to, taxes on real estate property, taxes on

territorial improvement, and taxes on placement of advertisements in public places).

(b) Without limiting the generality of the definition of Taxes as set forth in Section

2.8(a), the Parties hereby agree that the following taxes, duties, levies, contributions, and similar

charges are specifically included in the definition of "Taxes" requiring exemptions in accordance

with this Compact: (i) customs duties and associated fees; (ii) value added taxes ("VAT"); (iii)

registration and stamp taxes; (iv) taxes on the corporate incomes of professional, accounting or

consulting firms derived from Compact-related work; (v) taxes on the corporate income of

4
companies or other legal persons derived from Compact-related work; (vi) taxes on the personal

income of individuals working under the Compact; (vii) taxes on temporary admissions of

Compact-related goods and personal household goods; (viii) excise duties; (ix) customs

procedure taxes; (x) road taxes; and (xi) real estate taxes and other local taxes. With respect to

VAT and excise taxes on petroleum products, these will be addressed by way of a

reimbursement, as set forth in Schedule E of Annex VI.

(c) Unless otherwise agreed by MCC in writing, set forth in Annex VI are procedures

that the Government will implement to effectuate the exemption from Taxes required by Section

2.8(a) and Section 2.8(b) above with respect to each of the Taxes addressed therein. To the

extent that there are Taxes not addressed in Annex VI, whether currently in force or established

in the future, that MCC determines, in its sole discretion, are not being exempted by the

Government in accordance with this Section 2.8, the Government hereby agrees that it will

implement appropriate procedures (approved in writing by MCC) to ensure that such additional

Taxes are exempted in accordance with this Section 2.8. For the avoidance of doubt, the

identification (or lack of identification) of Taxes in Annex VI, or the description (or lack of

description) of procedures to implement the required exemption from such Taxes in Annex VI,

will in no way limit the scope of the tax exemption required by Section 2.8.

(d) Unless otherwise agreed in writing by the Parties, the exemption from Taxes set

forth in Section 2.8(a) and 2.8(b) will not apply to income Taxes on, and contributions to, social

insurance contributions and mandatory insurance charges for medical assistance, with respect to

legal persons or natural persons who are nationals of Moldova, provided that such Taxes and

contributions are not discriminatory and are generally applicable to all nationals in Moldova.

(e) In complying with the tax exemption obligations set forth herein, the Government

will exempt MCA-Moldova, the Fiscal Agent, the Procurement Agent, and/or any other provider

of goods, services, or works in connection with the Program from any obligation imposed by the

laws of Moldova to withhold any Taxes from any payments made to any natural persons or legal

persons working under the Program to the extent that such legal persons or natural persons are

not nationals of Moldova.

(f) For the purposes of Section 2.8(d), Section 2.8(e) and Annex VI, the term

"national" means natural persons who are citizens of Moldova or natural persons who hold a

Moldovan permanent residence certificate and legal persons formed under the laws of Moldova

(excluding (i) MCA-Moldova, and (ii) any foreign legal person, including any Moldovanregistered subsidiary, branch, representative office or other permanent establishment of a foreign

legal person, with respect to income earned for providing services, goods or works in connection

with this Compact); provided that in determining if a legal person has been formed under the

laws of Moldova, the taxable status of such legal person will be based on its status at the time it

is awarded or signs a Compact-related agreement or contract, and such initial determination will

not change regardless of: (1) the type of agreement or contract used to employ or engage such

company or other legal person; (2) any laws of Moldova that purport to change such status based

on period of contract performance or period of time residing and/or working in Moldova; and/or

(3) any requirement under the laws of Moldova that a company or other legal person must

establish a branch office in Moldova, or otherwise register or organize itself under the laws of

Moldova, in order to provide goods, services, or works in Moldova.

5
(g) The Government will from time to time sign and deliver, or cause to be signed

and delivered, such other instructions, instruments or documents, and to take or cause to be taken

such other actions as may be necessary or appropriate in the determination of MCC in order to

implement this Section 2.8.

(h) If a Tax has been levied and paid contrary to the requirements of this Section 2.8,

or any supplemental agreement entered into pursuant to this Section 2.8, the Government will

refund promptly to MCC (or to another party as designated by MCC) the amount of such Tax in

United States Dollars or the currency of Moldova within thirty (30) days (or such other period as

may be agreed in writing by the Parties) after the Government is notified in writing (whether by

MCC or MCA-Moldova) that such Tax has been paid.

(i) No MCC Funding, proceeds thereof, or Program Assets may be applied by the

Government in satisfaction of its obligations under this Section 2.8.

(j) The mechanism for application of the tax exemption described in this Section 2.8

and Annex VI will be provided in a Government decision to be enacted after ratification of this

Compact.

(k) Notwithstanding the provisions of this Section 2.8 and Annex VI, with respect to

all funding associated with the Activities which USAID intends to administer, the treatment of

Taxes, other fees and any other fiscal obligations to the Government will be in compliance with

the terms and conditions as stipulated and agreed to in the "Agreement between the Government

of the United States of America and the Government of Moldova Regarding Cooperation to

Facilitate the Provision of Assistance," which entered into force on March 21, 1994, as may be

amended from time to time.

ARTICLE 3.

IMPLEMENTATION

Section 3.1 Program Implementation Agreement. Prior to entry into force of this Compact,

the Government and MCC will enter into an agreement relating to, among other matters,

implementation arrangements, fiscal accountability and disbursement, and use of MCC Funding

(the "Program Implementation Agreement" or "PM"). The Government will implement the

Program in accordance with the Compact and the PIA.

Section 3.2 Government Responsibilities.

(a) The Government has principal responsibility for overseeing and managing the

implementation of the Program.

(b) The Government hereby designates MCA-Moldova, an entity to be established

through passage of a decree (the "Establishment Decree"), as the accountable entity to

implement the Program and to exercise and perform the Government's rights and responsibilities

with respect to the oversight, management, and implementation of the Program, including,

without limitation, managing the implementation of Projects and their Activities, allocating

resources, and managing procurements. Such entity will be referred to herein as "MCAMoldova," and will have the authority to bind the Government with regard to all Program

Activities. The Establishment Decree will be in form and substance satisfactory to MCC. For

6
the avoidance of doubt, the designation of MCA-Moldova as set forth in this Section 3.2(b) will

not relieve the Government of any of its obligations or responsibilities as set forth hereunder,

under any related agreement (including, upon execution thereof, the PIA), or under the Program

Guidelines, for which the Government remains fully responsible. MCC hereby acknowledges

and consents to the designation in this Section 3.2(b).

(c) The Government will ensure that no law or regulation in Moldova now or

hereinafter in effect makes or will make unlawful or otherwise prevent or hinder the performance

of any of the Government's obligations under this Compact, the PIA, or any other related

agreement or any transaction contemplated hereby or thereby.

(d) The Government will ensure that any assets or services funded in whole or in part

(directly or indirectly) by MCC Funding are used solely in furtherance of this Compact and the

Program unless otherwise agreed by MCC in writing.

(e) The Government will take all necessary or appropriate steps to achieve the

Program Objective and the Project Objectives during the Compact Term.

(f) The Government will fully comply with the Program Guidelines, as applicable, in

its implementation of the Program.

Section 3.3 Policy Performance. In addition to undertaking the specific policy, legal, and

regulatory reform commitments identified in Annex I (if any), the Government will seek to

maintain and to improve its level of performance under the policy criteria identified in Section

607 of the MCA Act, and the selection criteria and methodology used by MCC.

Section 3.4 Government Assurances. The Government assures MCC that, as of the date this

Compact is signed by the Government, the information provided to MCC by or on behalf of the

Government in the course of reaching agreement with MCC on this Compact is true, correct and

complete in all material respects.

Section 3.5 Implementation Letters. From time to time, MCC may provide guidance to the

Government in writing on any matters relating to this Compact, MCC Funding, or

implementation of the Program (each, an "Implementation Letter"). The Government will apply

such guidance in implementing the Program. Without limiting the foregoing, either Party may,

through its Principal Representative or any Additional Representative, as the case may be,

initiate discussions that may result in a jointly agreed-upon Implementation Letter to confirm and

record their mutual understanding on aspects related to the implementation of this Compact, the

PIA, or other related agreements.

Section 3.6 Procurement. The Government will ensure that the procurement of all goods,

works, and services by the Government, or any applicable provider providing goods, works, and

services, to implement the Program will be consistent with the program procurement guidelines

posted from time to time on the MCC Website (the "MCC Program Procurement Guidelines").

The MCC Program Procurement Guidelines include, among others, the following requirements:

(a) open, fair, and competitive procedures must be used in a transparent manner to

solicit, award and administer contracts and to procure goods, works, and services;

7
(b) solicitations for goods, works, and services must be based upon a clear and

accurate description of the goods, works, and services to be acquired;

(c) contracts must be awarded only to qualified contractors that have the capability

and willingness to perform the contracts in accordance with their terms on a cost effective and

timely basis; and

(d) no more than a commercially reasonable price, as determined, for example, by a

comparison of price quotations and market prices, will be paid to procure goods, works, and

services.

Section 3.7 Records; Accounting; Covered Providers; Access.

(a) Government Books and Records. The Government will maintain, and will use its

best efforts to ensure that all Covered Providers maintain, accounting books, records, documents,

and other evidence relating to the Program adequate to show, to MCC's satisfaction, the use of

all MCC Funding ("Compact Records"). In addition, the Government will furnish or cause to be

furnished to MCC, upon its request, all such Compact Records.

(b) Accounting. The Government will maintain, and will use its best efforts to ensure

that all Covered Providers maintain, Compact Records in accordance with generally accepted

accounting principles prevailing in the United States, or at the Government's option and with

MCC's prior written approval, other accounting principles, such as those (i) prescribed by the

International Accounting Standards Board, or (ii) then prevailing in Moldova. Compact Records

must be maintained for at least five (5) years after the end of the Compact Term or for such

longer period, if any, required to resolve any litigation, claims or audit findings or any statutory

requirements.

(c) Providers and Covered Providers. Unless the Parties agree otherwise in writing, a

"Provider" is (i) any entity of the Government that receives or uses MCC Funding or any other

Program Asset in carrying out activities in furtherance of this Compact, or (ii) any third party

that receives at least Fifty Thousand United Stated Dollars (US$50,000) in the aggregate of

MCC Funding (other than as salary or compensation as an employee of an entity of the

Government) during the Compact Term. A "Covered Provider" is (1) a non-United States

Provider that receives (other than pursuant to a direct contract or agreement with MCC) Three

Hundred Thousand United States Dollars (US$300,000) or more of MCC Funding in any

Government fiscal year or any other non-United States person or entity that receives, directly or

indirectly, Three Hundred Thousand United States Dollars (US$300,000) or more of MCC

Funding from any Provider in such fiscal year, or (2) any United States Provider that receives

(other than pursuant to a direct contract or agreement with MCC) Five Hundred Thousand

United States Dollars (US$500,000) or more of MCC Funding in any Government fiscal year or

any other United States person or entity that receives, directly or indirectly, Five Hundred

Thousand United States Dollars (US$500,000) or more of MCC Funding from any Provider in

such fiscal year.

(d) Access. Upon MCC's request, the Government, at all reasonable times, will

permit, or cause to be permitted, authorized representatives of MCC, an authorized Inspector

General, the United States Government Accountability Office, any auditor responsible for an

audit contemplated herein or otherwise conducted in furtherance of this Compact, and any agents

8
or representatives engaged by MCC or the Government to conduct any assessment, review, or

evaluation of the Program, the opportunity to audit, review, evaluate, or inspect facilities and

activities funded in whole or in part by MCC Funding.

Section 3.8 Audits; Reviews.

(a) Government Audits. Except as the Parties may otherwise agree in writing, the

Government will, on at least a semi-annual basis, conduct, or cause to be conducted, financial

audits of all disbursements of MCC Funding covering the period from signing of this Compact

until the earlier of the following December 31 or June 30 and covering each six-month period

thereafter ending December 31 and June 30, through the end of the Compact Term. In addition,

upon MCC's request, the Government will ensure that such audits are conducted by an

independent auditor approved by MCC and named on the list of local auditors approved by the

Inspector General of MCC (the "Inspector General") or a United States—based certified public

accounting firm selected in accordance with the "Guidelines for Financial Audits Contracted by

MCA" (the "Audit Guidelines") issued and revised from time to time by the Inspector General,

which are posted on the MCC Website. Audits will be performed in accordance with the Audit

Guidelines and be subject to quality assurance oversight by the Inspector General. Each audit

must be completed and the audit report delivered to MCC no later than ninety (90) days after the

first period to be audited and no later than ninety (90) days after each June 30 and December 31

thereafter, or such other period as the Parties may otherwise agree in writing.

(b) Audits of United States Entities. The Government will ensure that agreements

between the Government or any Provider, on the one hand, and a United States nonprofit

organization, on the other hand, that are financed with MCC Funding state that the United States

nonprofit organization is subject to the applicable audit requirements contained in OMB Circular

A-133 issued by the United States Government Office of Management and Budget ("OMB").

The Government will ensure that agreements between the Government or any Provider, on the

one hand, and a United States for-profit Covered Provider, on the other hand, that are financed

with MCC Funding state that the United States for-profit organization is subject to audit by the

applicable United States Government agency, unless the Government and MCC agree otherwise

in writing.

(c) Corrective Actions. The Government will (i) use its best efforts to ensure that

Covered Providers take, where necessary, appropriate and timely corrective actions in response

to audits, (ii) consider whether the results of a Covered Provider's audit necessitates adjustment

of the Government's records, and (iii) require each such Covered Provider to permit independent

auditors to have access to its records and financial statements as necessary.

(d) Audit by MCC. MCC will have the right to arrange for audits of the

Government's use of MCC Funding.

(e) Cost of Audits, Reviews or Evaluations. MCC Funding may be used to fund the

costs of any audits, reviews, or evaluations required under this Compact.

9
ARTICLE 4.

COMMUNICATIONS

Section 4.1 Communications. Any document or communication required or submitted by

either Party to the other under this Compact must be in writing and, except as otherwise agreed

with MCC, in English. For this purpose, the address of each Party is set forth below.

To MCC:

Millennium Challenge Corporation

Attention: Vice President, Compact Implementation

(in each case, with a copy to the Vice President and General Counsel)

875 Fifteenth Street, NW

Washington, DC 20005

United States of America

Facsimile: (202) 521-3700

Telephone: (202) 521-3600

Email: VPImplementation@mcc.gov (Vice President, Compact Implementation)

VPGeneralCounsel@mcc.gov (Vice President and General Counsel)

To the Government:

State Chancellery

Attention: Minister of State

1, Piata Marii Adunari Nationale

Chisinau MD-2033

Republic of Moldova

Facsimile: (373) 22 242 696

Telephone: (373) 22 250 104

Email: victor.bodiu@gov.md

with a copy to MCA-Moldova:

Upon establishment of MCA-Moldova, MCA-Moldova will notify the Parties of its

contact details.

Section 4.2 Representatives. For all purposes of this Compact, the Government will be

represented by the individual holding the position of, or acting as, the State Minister of Moldova,

and MCC will be represented by the individual holding the position of, or acting as, Vice

President, Compact Implementation (each of the foregoing, a "Principal Representative"). Each

Party, by written notice to the other Party, may designate one or more additional representatives

(each, an "Additional Representative") for all purposes other than signing amendments to this

Compact. The Government hereby irrevocably designates the Executive Director of MCAMoldova as an Additional Representative. A Party may change its Principal Representative to a

new representative that holds a position of equal or higher rank upon written notice to the other

Party.

1 0
Section 4.3 Signatures. With respect to all documents other than this Compact or an

amendment to this Compact, a signature delivered by facsimile or electronic mail will be binding

on the Party delivering such signature to the same extent as an original signature would be.

ARTICLE 5.

TERMINATION; SUSPENSION; REFUNDS

Section 5.1 Termination; Suspension.

(a) Either Party may terminate this Compact without cause in whole by giving the

other Party thirty (30) days written notice. MCC may also terminate this Compact without cause

in part by giving the Government thirty (30) days written notice.

(b) MCC may, immediately, upon written notice to the Government, suspend or

terminate this Compact or MCC Funding, in whole or in part, and any obligation related thereto,

if MCC determines that any circumstance identified by MCC as a basis for suspension or

termination (whether in writing to the Government or by posting on the MCC Website) has

occurred, which circumstances include, but are not limited, to the following:

(i) the Government fails to comply with its obligations under this Compact,

the PIA, or any other agreement or arrangement entered into by the Government in connection

with this Compact or the Program;

(ii) an event or series of events has occurred that MCC determines makes it

probable that the Program Objective or any of the Project Objectives will not be achieved during

the Compact Term or that the Government will not be able to perform its obligations under this

Compact;

(iii) a use of MCC Funding or continued implementation of this Compact or

the Program violates applicable law or United States Government policy, whether now or

hereafter in effect;

(iv) the Government or any other person or entity receiving MCC Funding or

using assets acquired in whole or in part with MCC Funding is engaged in activities that are

contrary to the national security interests of the United States;

(v) an act has been committed or an omission or an event has occurred that

would render Moldova ineligible to receive United States economic assistance under Part I of the

Foreign Assistance Act of 1961, as amended (22 U.S.C. 2151 et seq.), by reason of the

application of any provision of the Foreign Assistance Act of 1961 or any other provision of law;

(vi) Moldova is classified as a Tier 3 country in the United States Department

of State's annual Trafficking in Persons Report;

(vii) the Government has engaged in a pattern of actions inconsistent with the

criteria used to determine the eligibility of Moldova for assistance under the MCA Act; or

11
(viii) the Government or another person or entity receiving MCC Funding or

using assets acquired in whole or in part with MCC Funding is found to have been convicted of a

narcotics offense or to have been engaged in drug trafficking.

(c) All Disbursements will cease upon expiration, suspension, or termination of this

Compact; provided, however, MCC may permit MCC Funding to be used, in compliance with

this Compact and the PIA, to pay for (i) expenditures for goods, works, or services that are

properly incurred under or in furtherance of the Program before expiration, suspension, or

termination of this Compact, and (ii) reasonable expenditures (including administrative

expenses) properly incurred in connection with the winding up of the Program within one

hundred twenty (120) days after the expiration, suspension, or termination of this Compact, so

long as, with respect to (i) and (ii) herein, the request for such expenditures is submitted within

ninety (90) days after such expiration, suspension, or termination.

(d) Subject to Section 5.1(c), upon the expiration, suspension, or termination of this

Compact, (i) any amounts of MCC Funding not disbursed by MCC in accordance with the

Compact and the PIA will be automatically released from any obligation in connection with this

Compact, and (ii) any amounts of MCC Funding disbursed to the Permitted Account by MCC

but not expended before the expiration, suspension or termination of this Compact, plus accrued

interest thereon will be returned to MCC within thirty (30) days after the Government receives

MCC's request for such return; provided, however, that if this Compact is suspended or

terminated in part, MCC may request a refund for only the amount of MCC Funding allocated to

the suspended or terminated portion. For the avoidance of doubt, interest will accrue from the

date of the violation and will be calculated at the 10-year U.S. Treasury Note rate prevailing as

of the close of business in Washington, DC as of the date of MCC's request for payment.

(e) MCC may reinstate any suspended or terminated MCC Funding under this

Compact if MCC determines that the Government or other relevant person or entity has

committed to correct each condition for which MCC Funding was suspended or terminated.

Section 5.2 Refunds; Violation.

(a) If any MCC Funding, any interest or earnings thereon, or any asset acquired in

whole or in part with MCC Funding is used for any purpose in violation of the terms of this

Compact or the PIA, including, but not limited, to any violation of the Program Guidelines, then

MCC may require the Government to repay to MCC in United States Dollars the value of the

misused MCC Funding, interest, earnings, or asset, plus interest within thirty (30) days after the

Government's receipt of MCC's request for repayment. For the avoidance of doubt, interest will

accrue from the date of the violation and will be calculated at the 10-year U.S. Treasury Note

rate prevailing as of the close of business in Washington, DC as of the date of MCC's request for

payment. The Government will not use MCC Funding, proceeds thereof or Program Assets to

make such payment.

(b) Notwithstanding any other provision in this Compact or any other agreement to

the contrary, MCC's right under this Section 5.2 for a refund will continue during the Compact

Term and for a period of (i) five (5) years thereafter, or (ii) one (1) year after MCC receives

actual knowledge of such violation, whichever is later.

12
Section 5.3 Survival. The Government's responsibilities under Sections 2.4, 2.5, 2.6, 2.7, 2.8,

3.7, 3.8, 5.1(c), 5.1(d), 5.2, 5.3, 6.2, and 6.4 of this Compact will survive the expiration,

suspension or termination of this Compact.

ARTICLE 6.

COMPACT ANNEXES; AMENDMENTS; GOVERNING LAW

Section 6.1 Annexes. Each annex to this Compact constitutes an integral part hereof, and

references to "Annex" mean an annex to this Compact unless otherwise expressly stated.

Section 6.2 Amendments.

(a) The Parties may amend this Compact only by a written agreement signed by the

Principal Representatives.

(b) Without formally amending this Compact, the Government hereby acknowledges

and agrees that the Parties, may, through the Principal Representative, in the case of Moldova, or

Principal Representative, or any Additional Representative, in the case of MCC, as the case may

be, in writing, agree to modify any Annex to this Compact to (i) suspend, terminate, or modify

any project described in Annex I (each, a "Project" and collectively, the "Projects") or to create

a new project, (ii) change the allocations of funds among the Projects, the Project Activities, or

any Activity under Program administration or monitoring and evaluation, or between a Project

identified as of the signature of this Compact and a new project, (iii) modify the terms of Section

B.3 of Annex I, or (iv) add, delete, or waive any condition precedent described in Annex IV,

provided that any such modification (1) is consistent in all material respects with the Program

Objective, (2) does not cause the amount of Program Funding to exceed the aggregate amount

specified in Section 2.1 of this Compact (as may be modified by operation of Section 2.2(e) of

this Compact), (3) does not cause the amount of Compact Implementation Funding to exceed the

aggregate amount specified in Section 2.2(a) of this Compact, (4) does not cause the

Government's responsibilities or contribution of resources to be less than specified in this

Compact, (5) does not extend the Compact Term, and (6) in the case of a modification to change

allocations of funds among Projects or the creation of a new Project, does not materially

adversely affect any Activity under Program administration or monitoring and evaluation.

(c) Any modification of any Annex to this Compact signed in accordance with

Section 6.2(b), or any modification of any other provision of this Compact pursuant to Section

6.2(a), will be binding on the Government without the need for further action by the

Government, any further Parliamentary action, or satisfaction of any additional domestic

requirements of Moldova.

Section 6.3 Inconsistencies. In the event of any conflict or inconsistency between:

(a) any Annex to this Compact and any of Articles 1 through 7, such Articles 1

through 7 will prevail; or

(b) this Compact and any other agreement between the Parties regarding the Program,

this Compact will prevail.

13
Section 6.4 Governing Law. This Compact is an international agreement and as such will be

governed by the principles of international law.

Section 6.5 Additional Instruments. Any reference to activities, obligations, or rights

undertaken or existing under or in furtherance of this Compact or similar language will include

activities, obligations, and rights undertaken by or existing under or in furtherance of any

agreement, document, or instrument related to this Compact and the Program.

Section 6.6 References to MCC Website. 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 Website will be deemed a reference to such

document or information as updated or substituted on the MCC Website from time to time.

Section 6.7 References to Laws, Regulations, Policies, and Guidelines. Each reference in this

Compact, the PIA, or any other agreement entered into in connection with this Compact, to a

law, regulation, policy, guideline, or similar document (including, but not limited to, the Program

Guidelines) will be construed as a reference to such law, regulation, policy, guideline, or similar

document as it may, from time to time, be amended, revised, replaced, or extended and will

include any law, regulation, policy, guideline, or similar document issued under or otherwise

applicable or related to such law, regulation, policy, guideline, or similar document.

Section 6.8 MCC Status. MCC is a United States government corporation acting on behalf of

the United States government in the implementation of this Compact. MCC and the United

States government have no liability under this Compact, the Program Implementation

Agreement, or any related agreement, are immune from any action or proceeding arising under

or relating to any of the foregoing documents, and the Government hereby waives and releases

all claims related to any such liability. In matters arising under or relating to this Compact, the

Program Implementation Agreement, or any related agreement, neither MCC nor the United

States government will be subject to the jurisdiction of the courts of Moldova or of any other

jurisdiction or of any other body.

Section 6.9 Counterparts; Electronic Delivery.

(a) Counterparts. Signatures to this Compact, the Program Implementation

Agreement, and any amendments to such agreements that are done as instruments to be signed

by both Parties will be signed on the same page. Any other documents arising out of this

Compact, may be signed in one or more counterparts. Such counterparts when delivered and

taken together will constitute a single document.

(b) Electronic Delivery. A signature to this Compact, the Program Implementation

Agreement, and any amendments to such agreements, will be an original signature. With respect

to any other documents arising out of this Compact, a signature delivered by facsimile or

electronic mail in accordance with Section 4.1 of this Compact will be deemed an original

signature and will be binding on the Party delivering such signature, and the Parties hereby

waive any objection to such signature or to the validity of the underlying document, certificate,

notice, instrument, or agreement on the basis of the signature's legal effect, validity or

enforceability solely because it is in facsimile or electronic form.

14
ARTICLE 7.

ENTRY INTO FORCE

Section 7.1 Domestic Requirements. Before this Compact enters into force, the Government

will proceed in a timely manner to obtain ratification of this Compact by the Moldovan

Parliament. The Parties understand that, upon its entry into force this Compact will prevail over

the domestic laws of Moldova.

Section 7.2 Conditions Precedent to Entry into Force. Before this Compact enters into force:

(a) The PIA must have been signed by the parties thereto;

(b) The Government must have delivered to MCC:

(i) a legal opinion from the Minister of Justice of Moldova (or such other

legal representative of the Government acceptable to MCC), in form and substance satisfactory

to MCC; and

(ii) complete, certified copies of all decrees, legislation, regulations, or other

governmental documents relating to the Government's domestic requirements for this Compact

to enter into force and the satisfaction of Section 7.1, which MCC may post on the MCC Website

or otherwise make publicly available; and

(c) MCC must determine that, after signature of this Compact, the Government has

not engaged in any action or omission that is inconsistent with the eligibility criteria for MCC

Funding.

Section 7.3 Date of Entry into Force. This Compact will enter into force on the date of the

last letter in an exchange of letters between the Principal Representatives confirming that each

Party has completed its domestic requirements for entry into force of this Compact and that the

conditions precedent to entry into force of Section 7.2 have been met.

Section 7.4 Compact Term. This Compact will remain in force for five (5) years after its

entry into force, unless terminated earlier under Section 5.1 (the "Compact Term").

Section 7.5 Provisional Application. Upon signature of this Compact and until this Compact

has entered into force in accordance with Section 7.3, the Parties will provisionally apply the

terms of this Compact and the PIA; provided that, no Program Funding will be made available or

disbursed before this Compact enters into force.

SIGNATURE PAGE FOLLOWS ON THE NEXT PAGE

15
IN WITNESS WHEREOF, the undersigned, duly authorized by their respective

governments, have signed this Compact.

Done at Washington, DC, this 22nd day of January, 2010, in the English language only.

FOR MILLENNIUM CHALLENGE

CORPORATION, ON BEHALF OF THE

UNITED STATES OF AMERICA

FOR THE REPUBLIC OF MOLDOVA

P u1

Name: Daniel W. Y hannes Name: Iurie Leaned

Title: Chief Executive Officer Title: Deputy Prime Minister, Minister of

Foreign Affairs and European

Integration

SIGNATURE PAGE TO MILLENNIUM CHALLENGE COMPACT

BETWEEN THE UNITED STATES OF AMERICA

ACTING 'THROUGH THE MILLENNIUM CHALLENGE CORPORATION

AND THE REPUBLIC OF MOLDOVA
ANNEX I

PROGRAM DESCRIPTION

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

Compact Term.

A. PROGRAM OVERVIEW

1. Background and Consultative Process.

With a population of approximately 3.8 million inhabitants, Moldova was originally declared

eligible for MCC Compact assistance in 2006. The Government mobilized a team of consultants

to conduct an empirical analysis of the key constraints to growth. This constraints analysis

served as the basis for two rounds of national consultations through regional town-hall meetings,

as well as numerous meetings with smaller groups of stakeholders. Following these

consultations, the Government submitted a Compact proposal in February 2008. In addition to

the national consultations, project-specific consultations were conducted as part of the

environmental and social impact assessment, both by the Government and by MCC-contracted

entities. These public fora involved consultations with key stakeholders including: local

government officials, regional and national staff from government agencies, civil society

representatives, environmental and social non-governmental organizations, and interested local

people to evaluate the proposed projects, to raise concerns, and to make recommendations on the

design requirements to enhance benefits and reduce negative impacts from project

implementation. These recommendations are to be incorporated into the detailed design to better

address community needs. In addition, the Government and MCC worked with a consultative

group of public and private sector representatives in the agricultural sector.

Agriculture has been the backbone of the Moldovan economy, with Moldova formerly serving as

an important exporter of high value agriculture to the rest of the Soviet Union. Following the

collapse of the Soviet Union, Moldova lost its position as a key exporter of fresh produce, and its

extensive irrigation systems and post-harvest cold chain fell into disrepair.

Reforms necessary to attract private and donor investment in agriculture have been slow. As a

result, Moldovan agriculture suffers from low productivity, contributing to high rates of rural

poverty. However, with its fertile soils, relatively long growing season, and proximity to both

European Union and former Soviet markets, Moldova has many of the necessary conditions to

regain competitiveness in high value agriculture. The key constraints facing Moldovan

producers are: lack of reliable water, lack of financing, lack of access to markets and

technologies and lack of know-how. The Transition to High Value Agriculture Project will

address these constraints.

The quality of the road network in Moldova is seriously deteriorated and has been cited

repeatedly as a binding constraint to economic growth which impacts the entire country, as the

country's economy is highly dependent on road transport. The Road Rehabilitation Project will

address this constraint.
2. Program Objective.

The Program Objective is to increase incomes through increased agricultural productivity and

expanded access to markets and services through improved roads. The Program consists of the

Transition to High Value Agriculture Project and the Road Rehabilitation Project as further

described in this Annex I.

3. Environmental and Social Safeguards.

The Transition to High Value Agriculture Project and the Road Rehabilitation Project will be

implemented in compliance with the MCC Environmental Guidelines and MCC's environmental

and social guidelines posted from time to time on the MCC Website or otherwise made available

to the Government by MCC ("MCC Gender Policy") and any resettlement will be carried out in

accordance with best international resettlement standards based on the World Bank's Operational

Policy on Involuntary Resettlement in effect as of July 2007 ("OP 4.12") and in accordance with

procedures approved by MCC. The Government will also ensure that the Projects comply with

all national environmental laws and regulations, licenses and permits, except to the extent such

compliance would be inconsistent with this Compact. The Government will: (a) cooperate with

any ongoing environmental review, or if necessary undertake and complete any additional

environmental reviews, required by MCC or under the laws of Moldova; (b) implement to

MCC's satisfaction environmental and social mitigation measures identified in such

environmental review; and (c) commit to fund environmental mitigation, (including costs of

resettlement) in excess of MCC Funding not specifically provided for in the budget for any

Project.

To maximize the positive social impacts of the Projects, address cross-cutting social and gender

issues such as human trafficking, child and forced labor, and HIV/AIDS, and ensure compliance

with the MCC Gender Policy, MCA-Moldova will: (i) develop a comprehensive social and

gender integration plan which, at a minimum, identifies approaches for regular, meaningful and

inclusive consultations with women and other vulnerable/underrepresented groups, consolidates

the findings and recommendations of Project-specific social and gender analyses and sets forth

strategies for incorporating findings of the social and gender analyses into final Project designs

as appropriate; and (ii) ensure, through monitoring and coordination during implementation, that

final Project Activity designs, construction tender documents and implementation plans are

consistent with and incorporate the outcomes of the social and gender analysis and social and

gender integration plan.

B. DESCRIPTION OF THE PROJECTS

Set forth below is a description of each of the Projects that the Government will implement, or

cause to be implemented, using MCC Funding to advance the applicable Project Objective. In

addition, specific activities that will be undertaken within each Project (each, an "Activity"),

including sub-activities, are described.

I. Transition to High Value Agriculture Project.

(a) Summary of Project and Activities.

ANNEX 1 - 2
The objectives of the Transition to High Value Agriculture Project are to: (i) increase rural

incomes by stimulating growth in irrigated high value agriculture; and (ii) catalyze future

investments in high value agriculture by establishing a successful and sustainable model of

irrigation system and water resource management and a conducive institutional and policy

environment for irrigated agriculture.

The Transition to High Value Agriculture Project consists of four reinforcing and integrated

activities that, when implemented together, address the key constraints facing Moldovan

producers: lack of reliable water, lack of financing, lack of access to markets and technologies,

and lack of know-how (the "Transition to High Value Agriculture Project"). The Transition to

High Value Agriculture Project will increase the ability and willingness of farmers to make the

transition to higher value fruit and vegetable production. By addressing infrastructure and

institutional/market constraints, the Transition to High Value Agriculture Project will break the

vicious cycle of poor water service, low water tariff revenue, underinvestment in irrigation

system maintenance, and low investment by farmers in high value agriculture (resulting in low

agricultural incomes). The Transition to High Value Agriculture Project provides the first

opportunity to pilot a set of institutional and management reforms, together with much needed

infrastructure rehabilitation that will set the stage for future investment and enable Moldova to

benefit from its natural comparative advantage in agriculture.

The Transition to High Value Agriculture Project will: (i) rehabilitate up to 11 irrigation systems

covering a command area of up to approximately 15,500 hectares (the "Centralized Irrigation

System Rehabilitation Activity"); (ii) provide technical assistance and capacity building to (1)

support legal transfer of management and operations of MCC-rehabilitated systems from the

Government to Water User Associations ("WUAs"), (2) improve water resource management,

including establishment of a modern water rights system, and (3) ensure the legal and

institutional framework needed for private and/or donor investment in the irrigation sector (the

"Irrigation Sector Reform Activity"); (iii) provide term financing and technical assistance to

support high value agriculture-related investments by farmers and rural entrepreneurs (the

"Access to Agricultural Finance Activity"); and (iv) provide market development support and

technical assistance and training to help producers and agribusinesses better access high value

agriculture markets and support the shift to high value agriculture at the production and postharvest level, and promote sustainable agricultural practices (the "Growing High Value

Agriculture Sales Activity"), the latter to be undertaken jointly with, and administered by, the

United States Agency for International Development ("USAID").

The Transition to High Value Agriculture Project consists of the following Activities:

(i) Centralized Irrigation System Rehabilitation Activity.

Most of the Government-owned irrigation infrastructure in Moldova requires rehabilitation to

bring the systems back into working condition. MCC Funding will be used to rehabilitate up to

11 systems to provide reliable water to farm operations in their command areas. The 11 systems

eligible for rehabilitation have completed feasibility studies and are listed below, along with their

respective system numbers as listed in the Government proposal to MCC, as follows:

1. Chircani-Zirnesti (6-6)

2. Blindesti (3-2)

3. Grozesti (3-6)

ANNEx 1 - 3
4. Leova Sud (5-4)

5. Cahul (6-9)

6. Jora de Jos (11-6)

7. Lopatna (11-7)

8. Cosnita (12-3)

9. Criuleni (14-2)

10. Puhaceni (14-11)

11. Roscani (14-13)

Specifically, in the above systems that are rehabilitated, MCC Funding will support:

(1) Construction activities: These costs may include, without

limitation, simple repair and/or replacement of pumps, valves, piping and ancillary systems,

water intakes, related electrical and control systems, and pump station buildings; rehabilitation of

reservoirs; and, installation of new system components where needed.

(2) Non-construction activities: These costs may include, without

limitation, studies, construction supervision, WUA equipment reserve, environmental and social

mitigation (including temporary or permanent resettlement compensation associated with

construction) and other project management costs and technical assistance to be incurred in

connection with the Centralized Irrigation System Rehabilitation Activity.

(ii) Irrigation Sector Reform Activity.

The Irrigation Sector Reform Activity is designed to: (1) establish the enabling environment and

institutional capacity required to ensure effective management (operations, maintenance and

financing) of the rehabilitated irrigation systems (thereby better ensuring their sustainability);

and (2) improve Moldova's capacity to manage its limited water resources in light of increasing

demand for water and the expected effects of climate change.

MCC and the Government agree that institutional and policy reforms surrounding the centralized

irrigation sector are necessary to maximize sustainability and project impact. The Irrigation

Sector Reform Activity will transfer management responsibility for irrigation systems

rehabilitated using MCC Funding from the Government to users by establishing and building

capacity within WUAs. As a necessary condition for success in transfer of management and

operations and maintenance responsibilities to WUAs, a new WUA law acceptable to MCC

("WUA Law") is required in Moldova to provide a solid legal foundation both for the transfer

process and for the WUAs themselves to manage the systems. The Government will also ensure

passage of a new water law acceptable to MCC ("Water Law") that will provide more secure

long-term water rights and the framework to issue water management authorizations and

improved and upgraded systems for water resource management at the basin level.

The Irrigation Sector Reform Activity consists of two sub-Activities: (1) the creation and

implementation of improved institutional arrangements for the operations and maintenance of

rehabilitated irrigation infrastructure (the "Irrigation Management Transfer Sub-Activity"); and

(2) a comprehensive approach to water management to build the Government's capacity to

ensure that water resources are effectively managed over the long term (the "River Basin

Management Sub-Activity").

ANNEX I - 4
(1) Irrigation Management Transfer Sub-Activity.

The main objectives of the Irrigation Management Transfer Sub-Activity are: (A) establishment

of fully-functional WUAs with the capacity to effectively manage and maintain the rehabilitated

systems; and (B) legal transfer of management responsibilities from the Government to those

WUAs through management transfer agreements ("MTAs").

MCC Funding will support technical assistance and training to: (A) assist WUA formation in a

manner consistent with the WUA Law and with best practices of financially and operationally

sustainable water service entities; (B) build capacity within WUAs to exercise responsibility for

operations and maintenance of the rehabilitated systems; (C) support creation of a legal

environment that enables WUAs to exercise this responsibility (WUA Law, Water Law with

long-term water rights, and binding MTAs in full compliance with Moldovan law); and (D)

assist and support the Government, as the legal owner of the irrigation infrastructure, to negotiate

and sign system specific MTAs that legally transfer irrigation management responsibilities to

WUAs for all rehabilitated systems.

(2) River Basin Management Sub-Activity.

Water resource management is vital to the sustainability of both irrigated agriculture and

Moldova's long-term non-agricultural development. Growing demand for water, and concerns

about climate change and the increasing frequency of drought and floods require improved water

resource planning and secure water rights. The purpose of this sub-Activity is to help the

Government improve management of water resources and assess future water availability in

order to promote sustainable growth in the agricultural sector. In particular, the sub-Activity

will: (A) support the implementation of a Water Law and development of secondary regulations

institutionalizing a modern system of secure, long-term water rights and river basin management;

(B) provide institutional support and equipment (geographical information systems, databases,

and decision support tools) to the Government to improve its ability to monitor water quality and

quantity and issue water certificates under a Water Law and river basin management system; and

(C) build institutional capacity in the Government to engage stakeholders in the participatory

planning and management of water resources through a system of basin and sub-basin councils

and management plans.

(iii) Access to Agricultural Finance Activity.

The objective of the Access to Agricultural Finance Activity is to provide term financing needed

to support increased investment in the high value agriculture supply chain to facilitate transition

to high value agriculture, with particular focus on serving farmers and enterprises operating in

the irrigation systems targeted for rehabilitation. Improved sorting and packing of produce, and

the ability to extend the production and marketing season, can assist Moldovan producers to

become more competitive in domestic and export markets and to sell their production at a higher

price. However, with virtually no domestic sources of long-term funding and little ability to

access international debt markets, Moldovan financial institutions largely lack the ability to lend

for investments in the high value agriculture supply chain for periods longer than three years.

The Access to Agricultural Finance Activity will be initiated on a pilot basis, which will be

evaluated through an independent impact evaluation. The impact evaluation will likely involve

ANNEX I - 5
some denial of credit under the Activity to otherwise eligible approved borrowers, possibly

through randomization. The final decision whether to scale up or terminate the program will be

in accordance to the PIA and will ensure that the activity, if scaled up, is likely to have an

economic rate of return of 12 percent as determined by MCC's model for the Access to

Agricultural Finance Activity in consultation with MCA-Moldova, or a rate acceptable to MCC,

given the level of "additionality" of investment evidenced by the pilot, as well as other known

parameters and costs of the activity at the time of this review.

The Access to Agricultural Finance Activity consists of two sub-Activities: (1) term financing to

support increased investments in the high value agriculture value chain (the "High Value

Agriculture Post-Harvest Credit Facility"); and (2) demand-driven investment development

services support (the "Investment Development Services").

(1) High Value Agriculture Post-Harvest Credit Facility Sub-Activity.

The objective of the High Value Agriculture Post-Harvest Credit Facility will provide term loans

(three to seven years) through participating financial institutions ("PFIs") to fund post-harvest

supply chain investments. It will be managed by the Credit Line Directorate (the "CLD"), which

is a program management unit within the Ministry of Finance established by the World Bank to

oversee donor funded credit lines. Loans will be provided on a "back-to-back" basis (loans to

PFIs will be made against, and will mirror terms of, PFI loans to end-borrowers). PFIs will take

all repayment risk, with the obligation to repay loans regardless of the performance of the endborrowers. PFIs will make their own underwriting decisions, subject to eligibility requirements

stipulated by MCA-Moldova and MCC in the high value agriculture post- harvest policy and

procedures manual. The primary benefit of the High Value Agriculture Post-Harvest Credit

Facility is not to subsidize lending by financial institutions or investment by end borrowers, but

instead to provide longer-term funding which is otherwise not available in the Moldovan financial

markets. An approximate market-based rate will be established and adjusting on new and existing

credits every six months, according to the process and methodology outlined in the high value

agriculture post-harvest policy and procedures manual. The full list of eligible investments will

be provided in the high value agriculture post-harvest policy and procedures manual. The

specific determination of interest rates will be done in a manner consistent with a positive

premium for the provision of term financing, and in a manner which prices loans not

significantly below market rates. MCC reserves the right to review rates in context of changing

market conditions, but will not raise the subsidy element as a means to increase disbursements

without independent analysis showing that this would lead to greater additionality of viable

investment. Borrowers are not restricted to investments in, adjacent to, or serving the MCC

irrigation command areas.

(2) Investment Development Services.

Support for investment development services will be provided on a demand-driven cost sharing

basis through Moldovan investment development service providers to those producers, producer

groups and rural entrepreneurs interested in developing post harvest investment projects and

obtaining loans for them via the High Value Agriculture Post-Harvest Credit Facility.

ANNEX - 6
(iv) Growing High Value Agriculture Sales Activity.

The objective of the Growing High Value Agriculture Sales Activity is to increase farmer

incomes by increasing sales of higher-value fruit and vegetables. Market assessments made

during the project development process (and supported by the analysis of other donors)

concluded that Moldova might have a comparative advantage in high value agriculture

production. However, to realize this comparative advantage and compete on international

markets, Moldovan high value agriculture producers and the Government will need to: (1)

aggressively seek export market opportunities; (2) upgrade production and the post harvest

supply chain; (3) improve the enabling environment and create conditions conducive to high

value agriculture (including reducing restrictions on new seed varieties and on imports of

fertilizers and agriculture equipments); and (4) improve Moldova's compliance with sanitary and

phytosanitary standards and ability to meet international standards.

To simplify implementation and increase efficiency, MCC Funding will be used to expand a

planned USAID-administered agricultural development project and to target Transition to High

Value Agriculture Project beneficiaries, such as producers within the rehabilitated systems and

other value chain actors active in the high value agriculture markets. Subject to funding

availability, USAID intends to contribute funding and administer and implement the program on

behalf of MCA-Moldova and MCC. Specifically, MCC Funding will support the following tasks

under the joint MCA-Moldova and USAID Growing High Value Agriculture Sales Activity:

(1) Develop and Expand Market Opportunities for Moldovan High

Value Agriculture Sub-Activity. This sub-activity will focus on identifying market opportunities

and understanding buyer requirements and specifications, with the objective of increasing export

sales and attracting regional buyers and private sector investment to Moldova. As a part of the

process of facilitating transactions and promoting Moldova as a source of high value agriculture

in the region, several approaches for establishing a sustainable yet flexible network of buyers

will be developed and tested.

(2) Training to Upgrade Production and Meet Buyer Requirements

Sub-Activity. This sub-activity will develop a field and classroom-based program to help value

chain actors, with primary focus on producers and producer groups; better understand and meet

buyer requirements; reduce production and marketing costs; capture price premiums; and

increase sales through improved high value agriculture production, post-harvest, and marketing

practices. Training will include assistance to farmers to promote sustainable agricultural

practices, specifically pest management, and soil and water conservation. Moldovan agriculture

service providers, supplemented with international sector specialists as required, will implement

a no-fee training program targeting beneficiaries both inside and outside the rehabilitated

systems.

(3) Demand-Driven Technical Assistance to Upgrade the High Value 

Agriculture Value Chain Sub-Activity. This sub-activity is designed to support increased

investment and improved performance in the high value agriculture value chain, with particular

focus on the post-harvest infrastructure and equipment required to transition farmers to increased

production of high value agriculture and enable producers, wholesalers and exporters to remain

competitive and deliver fresh produce (properly packaged, stored and transported) to

increasingly quality conscious buyers in the European Union, Commonwealth of Independent

States, and domestic retail markets. A pre-approved group of local and international service

ANNEX I - 7
providers will be established to provide customized consulting and business development

services on a competitive, cost-sharing basis.

(4) Implement Recommendations for an Improved Enabling

Environment Sub-Activity. This sub-activity will augment on-going efforts by USAID and other

donors to identify and implement needed policy reforms in the agriculture sector which will

improve competiveness and increase or preserve access to export markets. This task will: (A)

provide technical assistance to help the Government adopt legislation and policies to implement

reforms that support high value agriculture, with specific attention to improving access to (and

reducing import tariffs on) quality seeds, fertilizers, and other inputs, including high value

agriculture-related equipment; and (B) establish sanitary and phytosanitary standards systems

and procedures to support exports and reduce the risks of export bans through narrowly targeted

upgrades in Government sanitary and phytosanitary controls, including laboratory equipment.

As part of this component, the Ministry of Agriculture and Food Industry will be required to

provide refurbished laboratory space, in conditions acceptable to USAID.

(b) Beneficiaries.

By 2029, the Parties expect that the Transition to High Value Agriculture Project will have

benefitted at least 124,000 individuals, or at least 31,000 households. Beneficiaries of the

Transition to High Value Agriculture Project include households with owners or shareholders of

farming enterprises, farmers or owners of land, producers and intermediaries investing in and

working in the high agriculture value sector, and laborers employed in the operation of enterprise

farms within the command areas where MCC will rehabilitate the irrigation systems and

producers and agribusinesses outside the systems targeted for rehabilitation that are already

engaged in the high value agriculture sector.

Farm enterprises in the centralized irrigation system areas are expected to capture the majority of

the Transition to High Value Agriculture Project's benefits. Up to 3,100 farm households are

expected to benefit from the rehabilitation of centralized irrigation systems. Switching from

non-irrigated to irrigated agriculture in Moldova can increase profitability by 200-500 percent or

higher on a per hectare basis, depending on the crop mix. In the next 20 years, poor households

could realize a cumulative increase in income equivalent to three years of current farm earnings,

even with assumptions of gradual and partial adoption of irrigation. Individuals employed in

seasonal labor will also benefit from the Transition to High Value Agriculture Project. Demand

for seasonal labor is projected to increase as farms switch from grains to more labor-intensive

high value agriculture crops. A projected 9,300 employees, most of whom are poor, will realize

increased wage income due to greater demand for agricultural labor in the centralized irrigation

system areas. Landowners will also benefit from the increased productivity and value of their

land once it has access to irrigation. It is projected that approximately 15,500 individuals renting

out their agricultural land will realize increased rent income of at least 20 percent.

The Access to Agricultural Finance Activity will directly benefit more than 100 post-production

investors. The Growing High Value Agriculture Sales Activity, which is intended to use USAID

funds, subject to availability, and MCC Funding, will assist individuals in the centralized

irrigation system areas, as well as an additional 2,000 high value agriculture producers outside

the centralized irrigation system areas, of whom at least 1,300 producers are expected to realize

income gains. Additionally, the policy improvement and efforts to improve sanitary and

phytosanitary standards of the Growing High Value Agriculture Sales Activity is expected to

ANNEX I - 8
increase and safeguard incomes for all high value agriculture producers in Moldova, estimated at

83,000 households and 3 15,000 beneficiaries as of 2009.

(c) Environmental and Social Mitigation.

The Transition to High Value Agriculture Project is classified as "Category A" according to

MCC Environmental Guidelines because it could potentially result in significant, long-term

direct, indirect, and cumulative environmental and social impacts, including impacts to two

international waterways. Environmental and social impact assessments have been initiated,

which will inform detailed project design and establish environmental management plans and

resettlement policy framework or action plans to be implemented during the construction and

operation phases of the project

The Access to Agricultural Finance Activity will be designed and implemented in accordance

with requirements set forth in MCC Environmental Guidelines for "Category D" (financial

intermediary) projects, requiring pre-screening of loan applications for environmental and social

impacts as part of the approval process. MCC Environmental Guidelines under Category D

reserves for MCC the "right to set additional performance standards and monitoring

requirements for subprojects on a case-by-case basis, depending on the nature of the intermediate

facility."

(d) Donor Coordination.

MCC has coordinated closely with the two donors most active in the agriculture sector in

Moldova — USAID and the World Bank — on the Transition to High Value Agriculture Project.

MCC has also worked closely with the European Union, World Bank, Organization for

Economic Co-operation and Development, and the United Nations Development Fund for

Women on environmental and social issues such as water resource management and gender.

Further, the World Bank Mission in Chisinau, Moldova, and World Bank sector and regional

specialists in Washington, DC, have provided contacts, studies, lessons learned, and informal

peer review at all stages in the process starting with early concerns about land tenure and

consolidation issues. Input and collaboration between the World Bank and MCC have been the

most significant and influential in the development of the access to agricultural finance,

irrigation management transfer, and food safety components and interventions.

Also significant is the successful partnership between USAID, MCC and MCA-Moldova.

USAID and MCC worked together to develop a joint project designed to build on USAID's 15

years of experience in the agriculture sector and, at the same time, support the significant MCC

irrigation infrastructure investment. Subject to the availability of funds, the joint Growing High

Value Agriculture Sales Activity is intended to provide the technical assistance and market

development support needed to help producers transition to high value agriculture fruit and

vegetable crops. The Growing High Value Agriculture Sales Activity, which will target, but will

not be limited to, areas where MCC irrigation rehabilitation will occur, is designed to emphasize

promotion of market opportunities within Moldova and encourage increased private sector and

foreign investment in the high value agriculture sector. Subject to the availability of funds,

USAID intends to contribute funding for the Growing High Value Agriculture Sales Activity,

which would be administered by USAID on behalf of MCA-Moldova. This joint approach

addresses and reduces implementation capacity concerns by allowing for improved

implementation and project oversight and more efficient use of resources.

ANNEX I - 9
(e) Sustainability.

The Transition to High Value Agriculture Project is designed as a comprehensive project that

will increase farmer incomes and break the cycle of poor water service, low water tariff revenue,

underinvestment in irrigation system maintenance, and low investment by farmers in high value

agriculture. Each of the four activities reinforces the other in ensuring project sustainability and

building the capacity of local institutions and service providers.

The Irrigation Sector Reform Activity, and its Irrigation Management Transfer Sub-Activity and

River Basin Management Sub-Activity, are designed to ensure that the rehabilitated centralized

irrigation systems (MCC's primary high value agriculture investment) are effectively operated

and maintained through the transfer of responsibility for operations and maintenance to the

WUAs. A condition for commencing rehabilitation of these systems is the passage of a WUA

Law that will support the legal transfer of responsibility for Government owned assets to WUAs.

The WUA Law will require that WUA membership represents at least 50 percent of the users

and 50 percent of the intended service area of the WUA. The WUA Law will also empower the

WUAs with the authority to establish and collect water tariffs sufficient to cover their fixed costs

and ensure financial stability of the rehabilitated systems. The River Basin Management SubActivity will provide a comprehensive approach to water management to build the Government's

capacity to ensure that water resources are effectively managed over the long term.

The Access to Agricultural Finance Activity and Growing High Value Agriculture Sales Activity

address the need to upgrade production and the high value agriculture value chain in order for

Moldovan high value agriculture producers to become and remain competitive in the long term.

It will also promote water and soil conservation, integrated pest management, and other

sustainable agricultural practices. Both of these activities are driven by market signals and

demand from the value chain actors, ensuring that the most appropriate and targeted training and

technical assistance is provided. Technical assistance programs in both activities will utilize

local service providers whenever possible, and will provide training to those local service

providers so that they are able to sustainably serve the market after the Compact is completed.

The High Value Agriculture Post-Harvest Credit Facility is intended to extend beyond the end of

the Compact to facilitate issuance of loans extending beyond the Compact.

(f) Policy, Legal and Regulatory Reforms.

Regulatory reform is required for the success of the Transition to High Value Agriculture

Project. The publication in the "Monitorul Oficial" of the WUA Law acceptable to MCC, which

law will be in full force and effect no later than three months after the date of publication, is a

condition precedent to signing the detailed design studies contract for the centralized irrigation

system rehabilitation. Registration of WUAs to operate and maintain the centralized irrigation

systems to be rehabilitated, and publication in the "Monitorul Oficial" of the Water Law

acceptable to MCC are conditions precedent to commencement of procurement for the

centralized irrigation system construction works contract.

ANNEX I - 10
2. Road Rehabilitation Project.

(a) Summary of Project and Activities.

The objectives of the Road Rehabilitation Project (the "Road Rehabilitation Project") are to: (i)

increase incomes of the local population by reducing the cost of transport, goods and services;

(ii) reduce losses to the national economy resulting from the deteriorated road conditions; and

(iii) reduce the number of road accidents trough improved traffic conditions. Rooted in the

National Development Strategy and the Land Transport Infrastructure Strategy (2008-2017), the

Road Rehabilitation Project was developed with the assistance of external partners in the road

sector (World Bank, European Bank for Reconstruction and Development, European Investment

Bank, European Commission, and MCC, collectively the "Joint Group"). The strategy

recommends the rehabilitation of the major trans-national axis that crosses Moldova from north

to south.

The Road Rehabilitation Project will improve part of the M2' road ("M2"), which is an arterial

highway from the Moldovan capital, Chisinau, through the city of Soroca, to the Ukrainian

border and beyond to Kyiv, the Ukrainian capital. This route contains significant traffic flows,

serves as a significant link between Moldova and Ukraine for private, passenger, and commercial

traffic, and has been prioritized by the Government for rehabilitation.

The Road Rehabilitation Project consists of the following:

(i) M2 Road Activity.

MCC Funding will be used to rehabilitate and upgrade a 93 km portion of the M2, beginning

near Sarateni at the southern end and ending at the junction with the R7 road west to Drochia

(the "Drochia junction") at the northern end (the "M2 Road Activity"). MCC Funding will also

be used to replace or upgrade associated structures within this segment of the M2, such as

bridges, drainage systems and culverts, to improve road maintenance and safety. The M2's

improvement is expected to reduce vehicle operating costs, reduce travel time, change

maintenance costs, cause an increase in the value of goods moved and cause an increase in

frequent travel. Specifically, MCC Funding will support:

(1) Construction costs: These costs include, without limitation,

pavement rehabilitation and strengthening, embankment construction, road safety improvements,

replacement or upgrading of associated structures, such as bridges, drainage systems and

culverts, and any activity associated with the environmental management plan developed with

respect to the Activity.

(2) Non-construction costs: These costs include, without limitation,

studies, construction supervision, environmental and social mitigation (including resettlement),

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

ANNEX I - 11
and other project management costs and technical assistance to be incurred in connection with

the M2 Road Activity.

(ii) Supplemental Feasibility Study/ESIA and Design.

MCC Funding will also be used for a feasibility study/environmental and social impact

assessment for the road segment from Arionesti to the border crossing in Otaci, detailed design

work, a resettlement action plan and an updated environmental and social impact assessment for

the entire road section from the Drochia junction to the border crossing in Otaci.

(b) Beneficiaries.

The M2 Road Activity is expected to benefit approximately 78,000 households over the next 20

years, or approximately 302,000 beneficiaries. Rehabilitation of the M2 will benefit the users

and owners of motorized vehicles utilizing the road, including local agricultural and other

producers and buyers; providers and users of passenger transport services; and non-commercial

owners of private motorized transport. In addition, sellers and merchandisers of products

transported along this road will likely benefit. At present there are approximately 273,000

beneficiaries living along the road, and approximately 29,000 individuals from the road

rehabilitation outside the region. Over 20 years, poor beneficiary households (earning less than

US$2 purchasing power parity ("PPP") per day per capita) could realize a cumulative increase in

income equivalent to more than one year of current income. Taking into account traffic

originating from and destined for areas outside the adjacent areas, the beneficiary analysis

estimates that about 15 percent of the beneficiaries of the investment will be among households

that now live on less than US$2 per person per day (in PPP terms).

(c) Environmental and Social Mitigation.

The M2 Road Activity is classified as "Category B" according to MCC Environmental

Guidelines. The M2 Road Activity is expected to produce site-specific and limited

environmental and social impacts that can be mitigated and monitored. An environmental and

social impact assessment has been initiated which will inform detailed product design and

establish an environmental management plan and resettlement policy framework and action

plans for construction.

(d) Donor Coordination.

In addition to general coordination with the Joint Group, the Road Rehabilitation Project will

benefit from technical assistance being provided to the State Road Administration through the

Road Sector Support Program funded by an approximate US$5 million World Bank credit. The

program will fund consulting services for design and introduction of an axle load control system;

consulting services for reform of road maintenance execution arrangements (including road asset

valuation); technical and financial audits; support by local consultants in the areas of

procurement, environment, and financial management; and training activities.

(e) Sustainability.

Sustainability of the Road Rehabilitation Project requires both routine and periodic maintenance,

which can only be accomplished if there is adequate funding and if appropriate mechanisms are

ANNEX 1 - 12
in place to carry out the maintenance. A lack of maintenance is evidenced by the state of

deterioration of the road. At least 50 percent of the road needs to be reconstructed from the subbase. Most of the bridges show severe corrosion of the reinforcement bars, causing a loss of

required strength and concrete spalling.

The Government, with the assistance of the Joint Group, had adopted the Land Transport

Infrastructure Strategy, which, along with other points, addresses the current deficiencies in road

maintenance funding and execution. In particular, the Government committed in writing in

February 2008 to amend the Road Fund Law to ensure that an adequate percentage of the

revenue from the fuel excise tax, sources of revenue introduced in large part to fund road

maintenance, would be automatically allocated to the Road Fund.

To increase the likelihood of sustaining the benefits of the rehabilitated M2, and to prepare a

more sustainable basis for future investments in the roads sector, the Government will provide

MCC with evidence that an amended Road Fund Law, providing a more reliable mechanism for

adequate road maintenance funding, is in full force and effect, before invitations for construction

bids are issued under the Compact. Measurable progress monitors are set forth in the Program

Implementation Agreement as conditions precedent to disbursement for the Road Rehabilitation

Project.

(f) Policy, Legal and Regulatory Reforms.

Policy, legal, and regulatory reforms are required to implement the Road Rehabilitation Project.

As a condition precedent to commencement of procurement for construction, the Government

will ensure the amendment of the Road Fund Law to provide sustainable funding for adequate

road maintenance.

3. Implementation Framework.

(a) Overview.

The implementation framework and the plan for ensuring adequate governance, oversight,

management, monitoring and evaluation, and fiscal accountability for the use of MCC Funding

are summarized below. MCC and the Government will enter into the Program Implementation

Agreement, and any other agreements in furtherance of this Compact, all of which, together with

this Compact, set out certain rights, responsibilities, duties and other terms relating to the

implementation of the Program.

(b) MCC.

MCC will take all appropriate actions to carry out its responsibilities in connection with this

Compact and the Program Implementation Agreement, including the exercise of its approval

rights in connection with the implementation of the Program.

(c) MCA-Moldova.

In accordance with Section 3.2(b) of this Compact, MCA-Moldova will act on the Government's

behalf to implement the Program and to exercise and perform the Government's rights and

responsibilities with respect to the oversight, management, monitoring and evaluation, and

implementation of the Program, including, without limitation, managing the implementation of

ANNEX I - 13
Projects and their Activities, allocating resources, and managing procurements. The Government

will ensure that MCA-Moldova takes all appropriate actions to implement the Program,

including the exercise and performance of the rights and responsibilities designated to it by the

Government pursuant to this Compact and the Program Implementation Agreement. Without

limiting the foregoing, the Government will also ensure that MCA-Moldova has full decisionmaking autonomy, including, inter alia, the ability, without consultation with, or the consent or

approval of, any other party, to (i) enter into contracts in its own name, (ii) sue and be sued, (iii)

establish an account in a financial institution in the name of MCA-Moldova and hold MCC

Funding in that account, (iv) expend MCC Funding, (v) engage a fiscal agent who will act on

behalf of MCA-Moldova on terms acceptable to MCC, (vi) engage one or more procurement

agents who will act on behalf of MCA-Moldova, on terms acceptable to MCC, to manage the

acquisition of the goods, works, and services required by MCA-Moldova to implement the

activities funded by this Compact, and (vii) competitively engage one or more auditors to

conduct audits of its accounts. The Government will take the necessary actions to establish

MCA-Moldova, in accordance with the applicable conditions precedent to the disbursement of

Compact Implementation Funding set forth in Annex IV to this Compact.

MCA-Moldova will be administered and managed by a Steering Committee and a Management

Unit. In addition, MCA-Moldova will have the Consultative Group to continue the consultative

process during implementation of the Program. The governance of MCA-Moldova will be set

forth in more detail in the Establishment Decree, the Program Implementation Agreement, and

the internal regulations of MCA-Moldova ("MCA-Moldova Bylaws"), which will, collectively,

set forth the responsibilities of the Steering Committee, the Consultative Group and the

Management Unit. The MCA-Moldova Bylaws will be developed and adopted in accordance

with MCC's Guidelines for Accountable Entities and Implementation Structures, published on

the MCC Website (the "Governance Guidelines"), and will be in form and substance

satisfactory to MCC.

(i) Steering Committee.

(1) Composition. MCA-Moldova will be governed by the steering

committee, or the board of directors (the "Steering Committee"), which will consist of voting

members representing those Government ministries and civil society and private sector

organizations set forth in the Establishment Decree. The Steering Committee will also consist of

those non-voting observers set forth in the Establishment Decree. All voting members will be

selected in accordance with the MCA-Moldova Bylaws and must be sufficiently senior and

qualified to make decisions on behalf of their respective ministries and civil society and private

sector organizations, as applicable. Each voting member named to serve on the Steering

Committee, and any replacement for any voting member or any alteration of the size or

composition of the Steering Committee, will be subject to MCC prior approval. In the event that

none of the civil society and private sector organizations represented as voting members on the

Steering Committee are from an environmentally focused non-governmental organization, an

additional observer from such an organization, subject to the prior receipt of a no-objection

notice from MCC, will be appointed.

(2) Roles and Responsibilities. The Steering Committee will be

responsible for overseeing the implementation of the Program and will have final decisionmaking authority over the implementation of the Program. The Steering Committee will meet

regularly; the frequency of meetings will be set forth in the MCA-Moldova Bylaws and will be

ANNEX I - 14
in accordance with the Governance Guidelines. The specific roles of the voting members and

non-voting observers will be set forth in the Establishment Decree and the MCA-Moldova

Bylaws.

(ii) Consultative Group.

(1) Composition. Pursuant to the Establishment Decree, the

composition of the consultative group will be selected in accordance with the MCA-Moldova

Bylaws and the Governance Guidelines and subject to MCC approval (the "Consultative

Group"). Without limiting the foregoing, the Establishment Decree provides that the

Consultative Group will be composed of, inter alia, Program beneficiaries, regional and local

government representatives, entities with an interest or involvement in the implementation of the

Program, and any applicable civil society and private sector representatives. In addition, the

Steering Committee may establish regional, informal consultative groups in the project

intervention zones composed of, inter alia, Program beneficiaries, regional and local government

representatives, entities with an interest or involvement in the implementation of the Program,

and any applicable civil society and private sector representatives. The establishment and

composition of any such regional, informal consultative groups will also be subject to MCC

approval.

(2) Roles and Responsibilities. Consistent with the Governance

Guidelines, the Consultative Group (and any informal, regional stakeholders committees

established by the Steering Committee) will be responsible for continuing the consultative

process throughout implementation of the Program. While the Consultative Group (and any

informal, regional stakeholders committees established by the Steering Committee) will not have

any decision-making authority, it will be responsible for, inter alia, reviewing, at the request of

the Steering Committee or the Management Unit, certain reports, agreements, and documents

related to the implementation of the Program in order to provide advice and input to MCAMoldova regarding the implementation of the Program.

(iii) Management Unit.

(1) Composition. The management unit, which will be led by a

competitively selected Executive Director, will be composed of competitively selected staff with

expertise in the key components of the Program, including, without limitation, a Road

Rehabilitation Project Director, Transition to High Value Agriculture Director, Centralized

Irrigation System Rehabilitation Activity Director, as well as a Deputy Executive Director, a

Legal Advisor, and other key Directors, including, without limitation, a Finance and

Administrative Director, Communications and Documentation Director, a Procurement Director,

a Monitoring and Evaluation Director, Environmental and Social Director, and Social and

Gender Officer (the "Management Unit"). The Management Unit will also include such other

personnel as provided for in the MCA-Moldova Bylaws. The directors will be supported by

appropriate additional staff to enable the Management Unit to execute its roles and

responsibilities.

(iv) Roles and Responsibilities. The Management Unit will be based in

Chisinau, Moldova, and will be responsible for managing the day-to-day implementation of the

Program, with oversight from the Steering Committee. The Management Unit will serve as the

principal link between MCC and the Government, and will be accountable for the successful

ANNEX I - 15
execution of the Program, each Project, and each Activity. As a Government entity, MCAMoldova will be subject to Government audit requirements. As a recipient of MCC Funding,

MCA-Moldova will also be subject to MCC audit requirements.

(d) Implementing Entities.

Subject to the terms and conditions of this Compact and any other related agreements entered

into in connection with this Compact, the Government and MCC have identified certain principal

public institutions that may or will serve as implementing entities (each, an "Implementing

Entity") to implement and carry out certain Projects and/or Activities (and/or any component

thereof) in furtherance of this Compact. Any Implementing Entity will be subject to review and

approval by MCC. The Government will ensure that the roles and responsibilities of each

Implementing Entity and other appropriate terms are set forth in an agreement between MCAMoldova and each Implementing Entity, which agreement must be in form and substance

satisfactory to MCC (each an "Implementing Entity Agreement").

(e) Fiscal Agent.

Unless MCC otherwise agrees in writing, the Government, directly or through MCA-Moldova,

will engage a fiscal agent (a "Fiscal Agent"), who will be responsible for assisting the

Government with its fiscal management and ensure appropriate fiscal accountability of MCC

Funding, and whose duties will include those set forth in the Program Implementation

Agreement.

(f) Procurement Agent.

Unless MCC otherwise agrees in writing, the Government, directly or through MCA-Moldova,

will engage one or more procurement agents (each, a "Procurement Agent") to carry out and

certify specified procurement activities in furtherance of this Compact. The roles and

responsibilities of each Procurement Agent will be set forth in the Program Implementation

Agreement or such agreement as the Government, directly or through MCA-Moldova, enters into

with each Procurement Agent, which agreement will be in form and substance satisfactory to

MCC. Each Procurement Agent will adhere to the procurement standards set forth in the MCC

Program Procurement Guidelines and ensure procurements are consistent with the procurement

plan adopted by MCA-Moldova pursuant to the Program Implementation Agreement, unless

MCC otherwise agrees in writing.

ANNEX I - 16
ANNEX H

MULTI-YEAR FINANCIAL PLAN SUMMARY

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

1. General.

A multi-year financial plan summary ("Multi-Year Financial Plan Summary") is attached

hereto as Exhibit A. By such time as is specified in the PIA, the Government will adopt, subject

to MCC approval, a multi-year financial plan that includes, in addition to the multi-year

summary of estimated MCC Funding and the Government's contribution of funds and resources,

the annual and quarterly funding requirements for the Program (including administrative costs)

and for each Project, projected both on a commitment and cash requirement basis ("Multi-Year

Financial Plan").
EXHIBIT A

MULTI-YEAR FINANCIAL PLAN SUMMARY

Multi-Year Financial Plan Summary

(USS

— Projected Disbursements

Project Prior to

EIF Year 1 Year 2 Year3 Year 4 Year 5 Total

1. Transition to High Value Agriculture (THVA) Project

Activity 1.1: Rehabilitation of

Centralized Irrigation

Systems (CIS)

Activity 1.2: Irrigation Sector

Reform (ISR)

Activity 1.3: Access to

Agricultural Finance (AAF)

Activity 1.4: Growing High

Value Agriculture Sales

(GHS)

Sub-Total 511,803 8,607,776 19,560,020 30,880,103 28,323,440 13,890,259 101,773,401

2. Road Rehabilitation Project

Activity 2.1: M2 Sarateni -

Drochia Junction

Activity 2.2: M2 Drochia

Junction - Otaci Studies

Sub-Total 37,500 2,037,500 26,278,000 52,206,000 39,142,000 13,139,000 132,840,000

3. Islonitoring and Evaluation (M&E)

Monitoring and Evaluation

Sub-Total 20,000 489,250 310,844 939,745 399,556 1,379,536 3,538,931

4.Program Administration and Audit

MCA-Moldova

Fiscal Agent / Procurement

Agent

Audit

Sub-Total 362,691 4,822,771 4,680,772 4,554,660 4,750,702 4,676,072 23,847,668

Grand Total 931,9942 15,957,297 50,829,636 88,580,508 72,615,698 33,084,867 262,000,000

2 Total commitments of Compact Implementation Funding are expected to be approximately US$8.0 million.

Disbursement of Compact Implementation Funding will continue after entry into force of the Compact.

ANNEX II - 2
ANNEX III

DESCRIPTION OF MONITORING AND EVALUATION PLAN

This Annex III (this "M&E Annex") generally describes the components of the Monitoring and

Evaluation Plan ("M&E Plan") for the Program. The actual content and form of the M&E Plan

will be agreed to by MCC and the Government in accordance with the Program Implementation

Agreement. The M&E Plan may be modified from time to time with MCC approval without

requiring an amendment to this Annex III.

1. Overview.

MCC and the Government will formulate and agree to, and the Government will implement, or

cause to be implemented, an M&E Plan that specifies (a) how progress toward the Compact

Goal, Program Objective and Project Objectives will be monitored ("Monitoring Component"),

(b) a process and timeline for the monitoring of planned, ongoing, or completed Project

Activities to determine their efficiency and effectiveness, and (c) a methodology for assessment

and rigorous evaluation of the outcomes and impact of the Program ("Evaluation Component").

Information regarding the Program's performance, including the M&E Plan, and any

amendments or modifications thereto, as well as progress and other reports, will be made

publicly available on the website of MCA-Moldova and elsewhere.

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, the Program Objective and the Project Objectives.

3. Monitoring Component.

To monitor progress toward the achievement of the impact and outcomes, the Monitoring

Component of the M&E Plan will identify (a) the Indicators (as defined below), (b) the

definitions of the Indicators, (c) the sources and methods for data collection, (d) the frequency

for data collection, (e) the party or parties responsible, and (f) the timeline for reporting on each

Indicator to MCC.

Further, the Monitoring Component will track changes in the selected Indicators for measuring

progress towards the achievement of the objectives during the Compact Term. The M&E Plan

will establish baselines which measure the situation prior to a development intervention, against

which progress can be assessed or comparisons made (each a, "Baseline"). MCA-Moldova will

collect Baselines on the selected Indicators or verify already collected Baselines where

applicable and as set forth in the M&E Plan.

(a) Indicators. The M&E Plan will measure the results of the Program using

quantitative, objective and reliable data ("Indicators"). Each Indicator will have benchmarks

that specify the expected value and the expected time by which that result will be achieved

("Target"). The M&E Plan will be prepared in accordance with the MCC Policy for Monitoring

and Evaluation of Compacts and Threshold Programs. All Indicators will be disaggregated by

gender, income level and age, and beneficiary types to the extent practicable. Subject to prior

written approval from MCC, MCA-Moldova may add Indicators or refine the definitions and

Targets of existing Indicators.
(i) Compact Indicators.

( 1 ) Goal. The M&E Plan will contain the following Indicators related

to the Compact Goal. The Target of these Indicators are national goals as specified in Moldova's

"National Development Strategy" to which the Project contributes, but are not solely attributable

to the Project:

(A) Absolute poverty rate nationwide: 30.2 percent to 20.0

percent by year 2015; and

(B) Absolute rural poverty rate: 34.1 percent to 22.6 percent by

year 2015.

(2) Other Indicators. The M&E Plan will contain the Indicators listed

in the following tables.

ANNEX III - 2
Table 1:

. Result

Transition to H igh Value Agriculture Project Objective

Indicator Definition of Indicator

Indicators

, RasOine3 gYear 5

Incomes increase due to

transition to high value

agriculture

interventions

Increase in the

annual profits

of crop

production per

hectare

Total annual profits of crop

production in areas targeted by the

Centralized Irrigation System

Rehabilitation Activity ("Target

Areas") (excluding rent and labor

cost) / total Target Areas (US$)4

180 390

Increase in the

rent for land

paid to lessors

per hectare

Average rent paid by lessee to

lessor per hectare of rented land in

Target Areas (US$)5

80 100

Increase in the

wage bill paid

to labor per

hectare

Value of labor (total person-days

of labor x average daily wage

excluding household labor) per

annum / total Target Areas (US$) 6

40 180

Increase in the

annual profits

among assisted

farms outside

of Target

Areas

Percent differential between

the annual per hectare profit

(excluding rent and labor costs)

realized among assisted farms

outside of Target Areas and a

comparison farm group

NA 20%

Moldova has examples

of a model for

transition to high value

agriculture in centrally

irrigated areas and an

enabling environment

(legal, financial, and

market) for replication

of the model

Increase in the

area irrigated in

Target Areas

Number of hectares of irrigated

crops (high value agriculture,

grains and technical crops) in

Target Areas 7

1,100 3,460

Adoption of

HVA crops in

Target Areas

Number of hectares of irrigated

and non-irrigated high value

agriculture crops (fruits, grapes,

vegetables, potatoes, etc.) in

Target Areas8

1,800 2,840

3 All currency figures are in 2009 values using a market conversion rate of 10.52 MDL/US$.

4

 After Year 5, MCC forecasts this figure will reach a peak value of 1,540 US$. The target refers and will be

assessed only with respect to irrigation systems which have been rehabilitated and have completed one growing

season after rehabilitation completion.

5

 The target refers and will be assessed only with respect to irrigation systems which have been rehabilitated and

have completed one growing season after rehabilitation completion.

6 After Year 5, MCC forecasts this figure will reach a peak value of 420 US$. The target refers and will be assessed

only with respect to irrigation systems which have been rehabilitated and have completed one growing season after

rehabilitation completion.

After Year 5, MCC forecasts this figure will reach a peak value of 13,000 hectares.

8 After Year 5, MCC forecasts this figure will reach a peak value of 9,300 hectares.

ANNEX III - 3
Table 1.1: Rehabilitation of Centralized Irrigation Systems Activity Indicators

Result .-;111 D finitiO4'ofUclicitor Baseline' . Ykai

Outcome Level indicators

Rehabilitated

centralized irrigation

systems can serve a

large agricultural area

Command area

with access to

functional systems

expands

Hectares of agricultural land

with access to the functional

centralized irrigation systems

rehabilitated under Compact

1,100 15,500

Output Level Indicators

Rehabilitated

centralized irrigation

systems can serve a

large agricultural area

Centralized

irrigation systems

rehabilitated

Number of centralized irrigation

systems with rehabilitation

works completed under Compact

NA 11

9 All currency figures are in 2009 values using a market conversion rate of 10.52 MDL/US$.

ANNEX III - 4
%.`Risnit ,

Table 1.2: Irrigation Sector Reform Activity Indicators

Indicator'-'16Defiiiition of Indicator ,:=Bis'iliiie '''' ' Year 5

Outcome Level Indicators

Management of

centralized

irrigation systems

shifted to users

WUAs established

under new law

Number of WUAs registered

under new specific WUAs law NA I I

, MTAs signed

Number of MTAs signed

between the Government,

assisted WUAs, and MCAMoldova

NA II

Effective

governance and

management in

systems

rehabilitated under

the Compact

Improved perception

of quality of service

by water users

Percentage of centralized

irrigation systems users

satisfied with the timeliness,

cost and administration of

irrigationl°

41 75

WUAs achieving

financial

sustainability

Number of assisted WUAs

where tariffs collected covers

100% of operating costs plus an

amount for capital/replacement

costs.

NA

11 or all

systems

rehabilitated

Active and

representative

governance

Number of WUAs with annual

plans and year end reports

approved by their respective

general assemblies

NA

11 or all

systems

rehabilitated

Gender-balanced

WUAs' management

and governance

Number of WUAs having at

least 20% of board member

positions filled by women

NA

9 or 80% of

systems

rehabilitated

Enhanced

management of

water resources

based on river

basin management

Revised water

management policy

framework - with

long-term water

rights defined —

established

The Water Law which

establishes long-term water

rights is in full force and effect

Water Law

circulated for

comments

Water Law

in full force

and effect

cost, and administrative service is measured through a weighted

and "5" to questions 20.1.3 (50 percent), 21.1.1 (25 percent), and

high value agriculture Baseline Farm Survey completed in 2009.

ANNEX III - 5

10 Index of perceptions/ satisfaction with timeliness,

average of percentages of users answering "4"

21.4.1 (25 percent) of the Moldova transition to
Resu ::

Table 1.3: Access

' -Ida i6tiir

to Agricultural Finance Activity Inclicators 11

 Definition of Indicatie:. , Baseline--,. .1' Wiii.?,5fr

Outcome Level Indicators

Post-harvest

infrastructure and

equipment is in

place to support

increases in high

value agriculture

New high value

agriculture postharvest

infrastructure and

equipment

operating

effectively

Operational cold-storage capacity

of high value agriculture postharvest structures financed under

the Access to Agriculture Finance

Activity (metric tons)

 120 10,500

Percentage of the financed amount

of the investment deemed to be

additional"

0 75

Investment

Development

Support Services

facilitate creation

of post-harvest

enterprises and

result in new jobs

New agricultural

loans resulting

from Investment

Development

Services

Number of agricultural loans

received by borrowers which

received support from Investment

Development Services

0 55

Output Level Indicators

Farmers and

agricultural

businesses have

enhanced access

to affordable and

adequate finance

Affordable

financing provided

for post-harvest

infrastructure

through the High

Value Agriculture

Post-Harvest

Credit Facility

Amount of loans provided under the

Access to Agriculture Finance

Activity for post-harvest

infrastructure (US$)

0 14,900,000

to the continuation and completion of the Activity after the pilot

loan volume of 14,900,000 US$, a price per metric ton for cold

ratio of 60 percent, and approximately 50 percent of total loans

facility is assumed to be operational within one year of the loan

not access financing from the project are expected to find financing

financing received by project beneficiaries.

ANNEX HI - 6

11 The achievements of these targets are subject

phase.

12 Based upon a projected cumulative five year

storage capacity of 750 US$, a loan-to-investment

financed devoted to cold storage. Cold storage

issuance.

13 For example, similar individuals who do

equivalent to or less than 25 percent of the
Table 1.4: Growing

:,Result

High Value Agriculture

it Ica tI,...

Sales (I:SAID-administered) ActiN it3,. Indicators"

." --Definition of Indicator Baseliiiel' , Year S

Outcome Level Indicators

Trade relations of

Moldovan high value

agriculture suppliers

are enhanced due to

promotion activities

Value of sales

facilitated

Value of annual sales facilitated

by the Activity contractor on

behalf of Moldovan producers

or producer groups (US$)

NA 10,500,000

Farmers, producer

business cooperatives,

and exporters meet

buyer requirements,

lower costs, capture

price premiums, and

increase sales due to

technical assistance

Farmers apply

acquired

knowledge

Number of farmers adopting

practices presented through

technical assistance programs,

among farmers within Target

Areas and farmers outside

Target Areas under the Growing

High Value Agriculture Sales

Activity

NA 2,800

Enabling environment

for high value

agriculture production

and export market

access is improved due

to implementation of

policy and sanitary and

phytosanitary standards

recommendations

Reduced risk of

export bans due to

improved export

certification and

inspection systems

Moldova sanitary and

phytosanitary services achieve

compliance with IPPC, ISPM

Guidelines 7, 20 and 23 and the

Central Phytosanitary

Laboratory is certified to ISO

9000 standards as confirmed by

an independent auditor

NA Audit

"passed"

14 The achievements of these targets are subject to full funding of this Activity by MCC (US$4.4 million) and

USAID (US$9.0 million, subject to availability of funds). In the case of partial funding of this Activity, the targets

will be revised by mutual agreement of MCC, USAID, and MCA-Moldova in the M&E Plan.

ANNEX III - 7
R6SuIe -

Table 2: Road Rehabilitation Indicators

, Indicator Defiriith5ii ''of iridic2tor - Bas#I le' = Year 5

Objective Level Indicators

Transportation

conditions are

enhanced

Reduced costs to

road users

Value of time savings and reduced

vehicle operating costs with the project

compared to no rehabilitation

(modeled by HDM4) (US$)

0

112,000,00

0

Increased

vehicular activity

Average annual daily traffic on the

road segment rehabilitated under

Compact

3,009 4,270

Outcome Level Indicators

Road quality is

improved

Improved

international

roughness index

International roughness index for the

road segment rehabilitated under

Compact' s

12 2

Road network is

sustainably

maintained

Revised

legislative basis

for road

maintenance

funding designed

to meet the needs

for sustainability

of roads

infrastructure

Appropriate legislation is in full force

and effect in accordance with the

Program Implementation Agreement to

ensure a sufficient percentage of

revenue from the fuel excise tax is

automatically allocated to the Road

Fund

partners

Draft Road

Fund Law

has been

presented to

the Joint

Group of

external

Road Fund

Law in full

force and

effect

Output Level Indicators

Roads are

rehabilitated

Total length of

roads

rehabilitated

Total length of road sections

rehabilitated (km) 0 93

(b) Data Collection and Reporting. The M&E Plan will establish guidelines for data

with data collection

Project Activities as

specify the data

on results at all levels.

analysis, and

as otherwise requested

to ensure that

objective of any data

data across

reviews also will

realities of data

during the life of the

collection and reporting, and identify the responsible parties. Compliance

and reporting timelines will be conditions for Disbursements for the relevant

set forth in the Program Implementation Agreement. The M&E Plan will

collection methodologies, procedures, and analysis required for reporting

The M&E Plan will describe any interim MCC approvals for data collection,

reporting plans.

(c) Data Quality Reviews. As determined in the M&E Plan or

by MCC, the quality of the data gathered

data reported are as valid, reliable,

quality review will be to verify the

different implementation units and

serve to identify where those levels

collection.

through the M&E Plan will be reviewed

and timely as resources will allow. The

quality and the consistency of performance

reporting institutions. Such data quality

of quality are not possible, given the

Roughness Index of the road segment

ANNEX III - 8

15 The target represents the minimum International

Compact.
(d) Management Information System. The M&E Plan will describe the information

system that will be used to collect data, store, process and deliver information to relevant

stakeholders in such a way that the Program information collected and verified pursuant to the

M&E Plan is at all times accessible and useful to those who wish to use it. The system

development will take into consideration the requirement and data needs of the components of

the Program, and will be aligned with existing MCC systems, other service providers, and

ministries.

(e) Role of MCA-Moldova. The monitoring and evaluation of this Compact spans

discrete Projects and will involve a variety of governmental, non-governmental, and private

sector institutions. Subject to Section 3.2(b) of the Compact, MCA-Moldova is responsible for

implementation of the M&E Plan. MCA-Moldova will oversee all Compact-related monitoring

and evaluation activities conducted for each of the Projects, ensuring that data from all

implementing entities is consistent, accurately reported and aggregated into regular Compact

performance reports as described in the M&E Plan.

4. Evaluation Component.

The evaluation component of the M&E Plan will contain three types of evaluations: (a) impact

evaluations; (b) project performance evaluations; and (c) special studies. The evaluation

component of the M&E Plan will describe the purpose of the evaluation, methodology, timeline,

required MCC approvals, and the process for collection and analysis of data for each evaluation.

The results of all evaluations will be made publicly available in accordance with MCC's

guidelines for monitoring and evaluation plans posted from time to time on the MCC Website

(the "MCC Policy for Monitoring and Evaluation of Compacts and Threshold Programs").

(a) Impact Evaluation. The M&E Plan will include a description of the methods to

be used for impact evaluations and plans for integrating the evaluation method into Project

design. Based on in-country consultation with stakeholders, the strategies outlined below were

jointly determined as having the strongest potential for rigorous impact evaluation. The M&E

Plan will further outline in detail these methodologies. Final impact evaluation strategies are to

be included in the M&E Plan. The following is a summary of the potential impact evaluation

methodologies:

(i) Transition to High Value Agriculture Project.

(1) The Centralized Irrigation System Rehabilitation Activity and

Irrigation Management Transfer Sub-Activity will be examined in conjunction with the MCC

sponsored impact evaluation in order to measure the combined effect of improved access to

water and the technical assistance offered under the Growing High Value Agriculture Sales

Activity as well as the stand alone value of the irrigation rehabilitation. Over time, hectares

irrigated, hectares producing high value agriculture crops, and farm profits in areas where the

Centralized Irrigation System Rehabilitation Activity and Irrigation Management Transfer

Activity are implemented should increase dramatically compared to areas outside the project

area, and the path of causation would be clear, therefore methodologies employing

randomization of access to the Centralized Irrigation System Rehabilitation Activity and

Irrigation Management Transfer Activity will not be a necessary element of the evaluation. This

strategy is contingent on timely execution of the Centralized Irrigation System Rehabilitation

Activity that would allow at least one growing season after improved irrigation to be observed.

ANNEX III-9
(2) For the Access to Agricultural Finance Activity, the incremental

impact that can be attributed to MCC's investments will be estimated by comparing outcomes

such as total investment and profitability between those who received loans through the program

and a comparison group. A suitable method for creating a comparison group is expected to

include an element of randomized credit provision. Challenges such as the availability of other

donor financing and the potentially limited scope of post-harvest investment in Moldova may

dictate amendments to this strategy during the evaluation design phase. Since gaps exist in many

countries' financial markets where banks rely on a high level of collateral and equity markets are

under-developed, it would be of value for Moldova, MCC, and the donor community to

understand the benefits and costs of subsidized lending. A mid-term review will be part of the

evaluation plan, and the activity may be terminated or scaled up depending upon the results of

this mid-term evaluation.

(3) For the Growing High Value Agriculture Sales Activity, the

evaluation is expected to determine how the Activity trainings affect prices, profit margins, and

yields. As it is intended that the Growing High Value Agriculture Sales Activity of the Compact

would be implemented by USAID, close coordination in the evaluation would be required. MCC

and USAID are currently in the process of defining how this coordination would occur and

confirming the feasibility of such coordination. Randomized selection criteria are expected to be

an element of the evaluation.

(ii) Road Rehabilitation Project.

A rigorous evaluation of the impact of the Road Rehabilitation Project is not envisioned due to

the lengthy time of construction and the natural time required for the economy to adapt to the

improvement.

(b) Final Evaluation. The M&E Plan will make provision for final Project level

evaluations ("Final Evaluations"). With the prior written approval of MCC, MCA-Moldova

will engage independent evaluators to conduct the Final Evaluations at the end of each Project.

The Final Evaluations will review progress during Compact implementation and provide a

qualitative context for interpreting monitoring data and impact evaluation findings. They must at

a minimum (i) evaluate the efficiency and effectiveness of the Project Activities, (ii) determine if

and analyze the reasons why the Compact Goal, Program Objective and Project Objective(s),

outcome(s) and output(s) were or were not achieved, (iii) identify positive and negative

unintended results of the Program, (iv) provide lessons learned that may be applied to similar

projects, and (v) assess the likelihood that results will be sustained over time.

(i) Special Studies. The M&E Plan will include a description of the methods

to be used for special studies, as necessary, funded through this Compact or by MCC. Plans for

conducting the special studies will be determined jointly between MCA-Moldova and MCC

before the approval of the M&E Plan. The M&E Plan will identify and make provision for any

other special studies, ad hoc evaluations, and research that may be needed as part of the

monitoring and evaluating of this Compact. Either MCC or MCA-Moldova may request special

studies or ad hoc evaluations of Projects, Project Activities, or the Program as a whole prior to

the expiration of the Compact Term. When MCA-Moldova engages an evaluator, the

engagement will be subject to the prior written approval of MCC. Contract terms must ensure

non-biased results and the publication of results.

ANNEX III - 10
(c) Request for Ad Hoc Evaluation or Special Study. If MCA-Moldova requires an

ad hoc independent evaluation or special study at the request of the Government for any reason,

including for the purpose of contesting an MCC determination with respect to a Project or

Activity or to seek funding from other donors, no MCC Funding or MCA-Moldova resources

may be applied to such evaluation or special study without MCC's prior written approval.

5. Other Components of the M&E Plan.

In addition to the monitoring and evaluation components, the M&E Plan will include the

following components for the Program, Projects and Project Activities, including, where

appropriate, roles and responsibilities of the relevant parties and providers:

(a) Costs. A detailed cost estimate for all components of the M&E Plan; and

(b) Assumptions and Risks. Any assumption or risk external to the Program that

underlies the accomplishment of the Program Objective, Project Objectives and Activity

outcomes and outputs. However, such assumptions and risks will not excuse any Party's

performance unless otherwise expressly agreed to in writing by the Parties.

6. Implementation of the M&E Plan.

(a) Approval and Implementation. The approval and implementation of the M&E

Plan, as amended from time to time, will be in accordance with the Program Implementation

Agreement and any other relevant supplemental agreement, and the MCC Policy for Monitoring

and Evaluation of Compacts and Threshold Programs.

ANNEX III - 11
ANNEX IV

CONDITIONS TO DISBURSEMENT OF COMPACT IMPLEMENTATION FUNDING

This Annex IV sets forth the conditions precedent applicable to Disbursements of Compact

Implementation Funding (each a "CIF Disbursement"). Capitalized terms used in this Annex IV

and not defined in this Annex IV or in the Compact have the meanings assigned to such terms in

the Program Implementation Agreement. Upon execution of the Program Implementation

Agreement, each CIF Disbursement will be subject to the terms and conditions of the Program

Implementation Agreement (including, without limitation, Section 3.3 thereof).

1. Conditions to the Initial CIF Disbursement.

Each of the following conditions precedent must have been met to MCC's satisfaction prior to

the initial CIF Disbursement:

(a) Prior to any CIF Disbursement into any Permitted Account in accordance with an

approved Disbursement Request, MCA-Moldova will have delivered to MCC a complete,

correct, and fully executed Disbursement Request for the relevant Disbursement Period, in form

and substance satisfactory to MCC and submitted in accordance with the Reporting Guidelines.

Each Disbursement Request will include the following reference number: GRO8MDA10010.

(b) (i) Each Activity being funded by such CIF Disbursement is consistent with the

goal of facilitating the implementation of the Compact (ii) there has been no violation of, and the

use of the requested funds for the purposes requested will not violate, the limitations on the use

or treatment of (1) MCC Funding, as set forth in this Compact, including under Section 2.7, or

(2) Compact Implementation Funding; and (iii) no material breach of any covenant, obligation,

or responsibility of the Government or MCA-Moldova under this Compact, the Program

Implementation Agreement, any supplemental agreement, or any Program Guidelines has

occurred or is continuing. MCA-Moldova will have delivered to MCC (x) evidence of the

adoption and publication of the Establishment Decree, and (y) an up-to-date extract from the

state registry verifying that MCA-Moldova is a fully-formed and registered public institution

under the laws of Moldova.

(c) MCA-Moldova will be sufficiently mobilized in order for MCA-Moldova to be

able to fully perform its obligations and to act on behalf of the Government.

(d) MCA-Moldova will have adopted a Procurement Plan, in form and substance

satisfactory to MCC, with respect to the Compact Implementation Funding, and such

Procurement Plan remains in full force and effect.

(e) MCA-Moldova will have adopted a Fiscal Accountability Plan, in form and

substance satisfactory to MCC, and such Fiscal Accountability Plan remains in full force and

effect.

(f) The Government will have adopted and published a decree, in form and substance

satisfactory to MCC, administratively implementing the tax exemption mechanism as set forth in

the Compact, and such decree will remain in full force and effect.
(g) The Fiscal Agent will have been duly appointed, and MCA-Moldova will have

duly executed the Fiscal Agent Agreement, and such agreement will be in full force and effect

without modification, alteration, rescission, or suspension of any kind, unless otherwise agreed

by MCC, and no material breach has occurred or is continuing thereunder.

(h) The Procurement Agent will have been duly appointed, and MCA-Moldova will

have duly executed an agreement with the Procurement Agent, and such agreement will be in full

force and effect without modification, alteration, rescission, or suspension of any kind, unless

otherwise agreed by MCC, and no material breach has occurred or is continuing thereunder.

(i) The Bank will have been duly appointed, and MCA-Moldova and the Fiscal

Agent will have duly executed the Bank Agreement, and such agreement will be in full force and

effect without modification, alteration, rescission, or suspension of any kind, unless otherwise

agreed by MCC, and no material breach has occurred or is continuing thereunder.

(j) The Permitted Account will be established.

2. Conditions to Each CIF Disbursement Thereafter.

Each of the following conditions precedent must have been met to MCC's satisfaction prior to

the applicable CIF Disbursement:

(a) Prior to any CIF Disbursement into any Permitted Account in accordance with an

approved Disbursement Request, MCA-Moldova will have delivered to MCC a complete,

correct, and fully executed Disbursement Request for the relevant Disbursement Period, together

with any applicable Periodic Reports covering such Disbursement Period, in each case in form

and substance satisfactory to MCC and submitted in accordance with the Reporting Guidelines.

Each Disbursement Request will include the following reference number: GRO8MDA10010.

(b) (i) Each Activity being funded by such CIF Disbursement is consistent with the

goal of facilitating the implementation of the Compact; (ii) there has been no violation of, and

the use of the requested funds for the purposes requested will not violate, the limitations on the

use or treatment of (1) MCC Funding, as set forth in this Compact, including under Section 2.7,

or (2) Compact Implementation Funding; (iii) no material breach of any covenant, obligation, or

responsibility of the Government or MCA-Moldova under this Compact, the Program

Implementation Agreement, any supplemental agreement, or any Program Guidelines has

occurred or is continuing; and (iv) any Taxes paid with MCC Funding through the date ninety

(90) days prior to the start of the applicable Disbursement Period have been reimbursed by the

Government in full in accordance with this Compact.

(c) The MCA-Moldova Procurement Plan will be in full force and effect.

(d) The MCA-Moldova Fiscal Accountability Plan will be in full force and effect.

(e) Each of the Fiscal Agent Agreement, the MCA-Moldova agreement with the

Procurement Agent, and the Bank Agreement will be in full force and effect without

modification, alteration, rescission, or suspension of any kind, unless otherwise agreed by MCC,

and no material breach has occurred or is continuing thereunder.

(f) The Permitted Account will be in effect.

ANNEX IV - 2
(g) The decree administratively implementing the tax exemption mechanism set forth

in the Compact will be in full force and effect.

ANNEX IV - 3
ANNEX V

DEFINITIONS

Access to Agricultural Finance Activity has the meaning provided in paragraph 1(a) of Part B of

Annex I.

Activity has the meaning provided in Part B of Annex I.

Additional Representative has the meaning provided in Section 4.2.

Audit Guidelines has the meaning provided in Section 3.8(a).

Baseline has the meaning provided in paragraph 3 of Annex III

Centralized Irrigation System Rehabilitation Activity has the meaning provided in paragraph 1(a) of

Part B of Annex I

CIF Disbursement has the meaning provided in Annex IV.

CLD has the meaning provided in paragraph I (a)(iii)(1) of Part B of Annex I

Compact has the meaning provided in the Preamble.

Compact Goal has the meaning provided in Section 1.1.

Compact Implementation Funding has the meaning provided in Section 2.2(a).

Compact Records has the meaning provided in Section 3.7(a).

Compact Term has the meaning provided in Section 7.4.

Construction Vendor has the meaning provided in Schedule E of Annex VI.

Consultative Group has the meaning provided in paragraph 3(c)(ii)(1) of Part B of Annex I.

Covered Provider has the meaning provided in Section 3.7(c).

Customs Code has the meaning provided in Schedule F of Annex VI.

Customs Tariff Law has the meaning provided in Schedule B of Annex VI.

Disbursement has the meaning provided in Section 2.4.

Establishment Decree has the meaning provided in Section 3.2(b).

Evaluation Component has the meaning provided in paragraph 1 of Annex III.

Excess CIF Amount has the meaning provided in Section 2.2(d).

Exempt Employers has the meaning provided in Schedule D of Annex VI.
Exempt Individual has the meaning provided in Schedule D of Annex VI.

Exempt Personal Income has the meaning provided in Schedule D of Annex VI.

Exempt Vendor has the meaning provided in Schedule C of Annex VI.

Final Evaluations has the meaning provided in paragraph 4(b) of Annex III.

Fiscal Agent has the meaning provided in paragraph 3(e) of Part B of Annex I

Governance Guidelines has the meaning provided in paragraph 3(c) of Part B of Annex I

Government has the meaning provided in the Preamble.

Government Decision No. 1140 has the meaning provided in Schedule F of Annex VI.

Growing High Value Agriculture Sales Activity has the meaning provided in paragraph 1(a) of Part B of

Annex I.

High Value Agriculture Post-Harvest Credit Facility has the meaning provided in paragraph 1 (a)(iii) of

Part B of Annex I.

Implementation Letter has the meaning provided in Section 3.5.

Implementing Entity has the meaning provided paragraph 3(d) of Part B of Annex I.

Implementing Entity Agreement has the meaning provided in paragraph 3(d) of Part B of Annex I

Indicators has the meaning provided in paragraph 3(a) of Annex III.

Inspector General has the meaning provided in Section 3.8(a).

Investment Development Services has the meaning provided in paragraph of 1(a)(iii) of Part B of

Annex I

Irrigation Management Transfer Sub-Activity has the meaning provided in paragraph 1 (a)(ii) of Part B

of Annex I.

Irrigation Sector Reform Activity has the meaning provided in paragraph 1(a) of Part B of Annex I

Joint Group has the meaning provided in paragraph 2(a) of Part B of Annex I

M2 has the meaning provided in paragraph 2(a) of Part B of Annex I.

M2 Road Activity has the meaning provided in paragraph 2(a)(i) of Part B of Annex I.

M&E Annex has the meaning provided in Annex III.

M&E Plan has the meaning provided in Annex III.

Management Unit has the meaning provided in paragraph 3(c)(iii)(1) of Part B of Annex I.

ANNEX V - 2
MCA Act has the meaning provided in Section 2.2(a).

MCA-Moldova has the meaning provided in Section 3.2(b).

MCA-Moldova Bylaws has the meaning provided in paragraph 3(c) of Part B of Annex I.

MCC has the meaning provided in the Preamble.

MCC Environmental Guidelines has the meaning provided in Section 2.7(c).

MCC Funding has the meaning provided in Section 2.3.

MCC Gender Policy has the meaning provided in paragraph 3 of Part A of Annex I.

MCC Policy for Monitoring and Evaluation of Compacts and Threshold Programs has the meaning

provided for in paragraph 4 of Annex III.

MCC Program Procurement Guidelines has the meaning provided in Section 3.6.

MCC Website has the meaning provided in Section 2.7.

Moldova has the meaning provided in the Preamble.

Monitoring Component has the meaning provided in paragraph 1 of Annex 

MTAs has the meaning provided in paragraph 1 (a)(ii)(1) of Part B of Annex I

Multi-Year Financial Plan has the meaning provided in paragraph 1 of Annex II.

Multi-Year Financial Plan Summary has the meaning provided in paragraph 1 of Annex II.

OMB has the meaning provided in Section 3.8(b).

OP 4.12 has the meaning provided in paragraph 3 of Part A of Annex 

Other Taxes has the meaning provided in Schedule I of Annex VI.

Party and Parties has the meaning provided in the Preamble.

Permitted Account has the meaning provided in Section 2.4.

Personal Income Taxes has the meaning provided in Schedule D of Annex VI.

PFIs has the meaning provided in paragraph 1(a)(iii)(1) of Part B of Annex I

PPP has the meaning provided in paragraph 2(b) of Part B of Annex I.

Principal Representative has the meaning provided in Section 4.2.

Procurement Agent has the meaning provided in paragraph 3(f) of Part B of Annex I

Program has the meaning provided in the Preamble.

ANNEX V - 3
Program Assets include MCC Funding, interest accrued thereon, and any assets, goods or property (real,

tangible or intangible) purchased or financed in whole or in part (directly or indirectly) by MCC

Funding.

Program Funding has the meaning provided in Section 2.1.

Program Guidelines means collectively the Audit Guidelines, the MCC Environmental Guidelines, the

Governance Guidelines, the MCC Program Procurement Guidelines, the Reporting Guidelines, the MCC

Policy for Monitoring and Evaluation of Compacts and Threshold Programs, and any other guidelines,

policies or guidance papers from time to time published on the MCC Website.

Program Implementation Agreement or PIA has the meaning provided in Section 3.1.

Program Objective has the meaning provided in Section 1.2.

Project(s) has the meaning provided in Section 6.2(b).

Project Objective(s) has the meaning provided in Section 1.3.

Provider has the meaning provided in Section 3.7(c).

Reporting Guidelines means the MCC "Guidance on Quarterly MCA Disbursement Request and

Reporting Package" posted by MCC on the MCC Website or otherwise publicly made available.

River Basin Management Sub-Activity has the meaning provided in paragraph 1(a)(ii) of Part B of

Annex I

Road Rehabilitation Project has the meaning provided in paragraph 2(a) in Part B of Annex I.

State Fiscal Inspectorate has the meaning provided in Schedule E of Annex VI.

Steering Committee has the meaning provided in paragraph 3(c)(0(1) of Part B of Annex I.

Target has the meaning provided in paragraph 3(a) of Annex III.

Target Areas has the meaning provided in Table 1 of Annex III.

Tax Agent has the meaning provided in Schedule I of Annex VI.

Tax Code has the meaning provided in Schedule A of Annex VI.

Taxes has the meaning provided in Section 2.8(a).

Transition to High Value Agriculture Project has the meaning provided in paragraph 1(a) of Part B of

Annex 

United States Dollars or US$ means the lawful currency of the United States of America.

USAID has the meaning provided in paragraph 1(a) of Part B of Annex I

VAT has the meaning provided in Section 2.8(b).

ANNEX V - 4
Vendor has the meaning provided in Schedule A of Annex VI.

Water Law has the meaning provided in paragraph 1 (a)(ii) of Part B ofAnnex I

WUA has the meaning provided in paragraph 1(a) of Part B of Annex 

WUA Law has the meaning provided in paragraph 1(a)(ii) of Part B of Annex 

ANNEX V - 5
ANNEX VI

SPECIFIC TAX EXEMPTION MECHANISMS
SCHEDULE A

VALUE ADDED TAX (VAT)

Legal Basis for Exemption.

1. The Compact

2. Article 4, clause (1) of the Tax Code of Moldova ("Tax Code") (Law

1163-XIII, dated April 24, 1997)

Beneficiaries of Exemption.

1. MCA-Moldova.

2. Each Implementing Entity, and any vendor procuring services, goods

or works in furtherance of the Compact (each a "Vendor").

Procedures.

The beneficiaries of the exemption will procure services, goods and works exempted from

VAT, except the procurement of petroleum products, which is addressed in Schedule E.

Purchase of Goods Exce t Im orted Goods Services and Works

In order for the beneficiaries of the exemption to obtain the VAT exemption from suppliers

of the goods (except imported goods), services and works supplied in Moldova, the MCAMoldova must provide the beneficiary of the exemption with an official letter from MCAMoldova, issued on official letterhead, which will confirm that such goods, services or works

are exempted from VAT, and which will contain the name of the project and the name of the

beneficiary of the exemption.

This letter will be attached to the applicable provider's invoice or waybill ("factura"). The

factura will serve as strict evidence of delivery of the goods, provision of services or

rendering of works. The "factura" will be countersigned by an authorized representative of

the beneficiary of the exemption. An original of the factura will be kept by the applicable

provider and will be provided in case of inspection by fiscal authorities to show the reason

for exemption from VAT.

Imported Goods

For the importation of goods into Moldova, the exemption from VAT will be applicable

while clearing the goods for customs. To receive the exemption from VAT, the beneficiary

of the exemption will file a request to the customs office supported by:

• a letter from MCA-Moldova, issued on official letterhead, which will

confirm that the goods are imported exclusively for the furtherance of
the Compact, the name of the project and the name of the beneficiary

of the exemption;

• invoice for the goods;

• copy of the purchase order or contract for the delivery of the

applicable goods to be used in furtherance of the Projects;

• transportation documents (CMR, TIR carnet, Airway bill, etc.); and

• certificates, authorizations, licenses, if required by Moldovan laws and

regulations for the importation of the goods.

Clearance will be granted by the customs offices with the exemption from VAT based on the

submission of the above-mentioned documents

SCHEDULE A - 2
SCHEDULE B

CUSTOMS DUTIES

Le al Basis for Exemption.

1. The Compact

2. Article 28, clause (n), and Article 31 and Note 1 of Annex 2 of the

Law on the Customs Tariff (the "Customs Tariff Law") (No. 1380-

XIII, dated November 20, 1997)

Beneficiaries of Exemption.

MCA-Moldova, each Implementing Entity, and any Vendor importing goods for the

furtherance of the Compact.

Procedures.

Clearance of the imported goods without customs duties will be performed by the customs

offices.

In order to obtain clearance for imported goods, the beneficiary of the exemption will submit

a request for such goods to be exempted from customs duties, supported by:

• a letter from MCA-Moldova, issued on official letterhead, which will

confirm that the goods are imported for the exclusive use of the

Compact, and which will contain the name of the project and the name

of the beneficiary of the exemption;

• the invoice for the goods;

• a copy of the purchase order or contract for the goods;

• transportation documents (CMR, TIR carnet, Airway bill, etc.); and

• certificates, authorizations, licenses, if required for the importation of

goods.
SCHEDULE C

CORPORATE INCOME TAX

Legal Basis for Exemption.

1. The Compact

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

Beneficiaries of Exemption.

1. MCA-Moldova.

2. Each Implementing Entity and any Vendor working in furtherance of

the Compact (each an "Exempt Vendor"), other than Vendors that are

nationals of Moldova.

Procedures.

• MCA-Moldova and all Exempt Vendors will be entitled to an

exemption from Moldovan tax on income earned from supplying

goods, works or services in furtherance of the Compact.

• MCA-Moldova will not be required to withhold tax from payments

made to an Exempt Vendor.

• The Exempt Vendor will not file any tax returns in Moldova for

income earned from supplies of goods, works and services in

furtherance of the Compact. In the event that an Exempt Vendor will

earn taxable income from Moldovan sources other than from

Compact-related activities, then such income will be recorded and

accounted for by the Exempt Vendor separately from the income from

Compact-related activities and will be outside the scope of the tax

exemptions provided under this Compact.
SCHEDULE D

INDIVIDUAL INCOME TAX

Legal Basis for Exemption.

1. The Compact

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

Beneficiaries of Exemption.

All natural persons working in furtherance of the Compact (each "Exempt Individual"),

other than nationals of Moldova. Non-Moldovan nationals working in furtherance of the

Compact who, after passage of time, become Moldovan "tax residents" for the purposes of

Moldovan tax law will also be deemed Exempt Individuals.

Procedures.

• The Exempt Individuals will be exempt from any income, social

security, medical insurance or other mandatory taxes and charges

imposed by Moldova or any subdivision thereof, regarding personal

income (the "Personal Income Taxes") received in connection with

income earned from works and services performed in furtherance of

the Compact (the "Exempt Personal Income").

• MCA-Moldova, the Implementing Entities, the Fiscal Agent and the

Procurement Agent and any other Vendor who employs Exempt

Individuals (the "Exempt Employers") will not withhold or pay

Personal Income Taxes for the Exempt Individuals.

• The Exempt Individual will have no obligation to file an income tax

return in Moldova in relation to Exempt Personal Income.

• The Exempt Employers will have no obligation under Moldovan law

in connection with the completion of any mandatory filings,

registrations and periodic reporting in relation to the Exempt Personal

Income of the Exempt Individuals.
SCHEDULE E

TAXATION OF PETROLEUM PRODUCTS

Legal Basis for Exemption.

1. The Compact

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

Beneficiaries of Exemption.

Vendors providing construction services to MCA-Moldova or another Vendor making largescale procurements of petroleum products for use in connection with such construction

projects (a "Construction Vendor").

Procedures.

A Construction Vendor procuring and/or importing petroleum products to be used for the

Compact Program will pay the VAT and excise duties at the point of purchase and request a

refund of these taxes.

In order to receive such refund, a Construction Vendor should submit to State Fiscal

Inspectorate under the Ministry of Finance of Moldova (the "State Fiscal Inspectorate") the

following documents:

• an official letter from MCA-Moldova, issued on official letterhead,

which will confirm the quantity/volume of petroleum products

specified in such Construction Vendor's bid for a program contract,

and which will contain the name of the construction project and the

name of the beneficiary of the exemption;

• an official request issued by the Construction Vendor requesting that

the State Fiscal Inspectorate refund VAT and excise-duty paid,

certifying (i) the maximum quantity/volume of petroleum products

specified in the beneficiary of the exemption's bid proposal for a

Program contract (which amount will be the maximum allowable

quantity subject to reimbursement), (ii) the quantity of petroleum

products subject to reimbursement in the pending request, (iii) the

quantity of petroleum products for which VAT and excise duties have

been previously reimbursed to the beneficiary of the exemption under

such contract, and (iv) that the petroleum products in the present

request were used in connection with the named construction project;

and

• the original fiscal invoice received from the supplier of the petroleum

products, while procuring them in the territory of Moldova and/or
customs declaration issued in the name of the Construction Vendor,

while importing the petroleum products into Moldova.

The above-mentioned documents will be submitted to State Fiscal Inspectorate on a monthly

basis for the petroleum purchases made during the previous calendar month.

The amount of VAT and excise-duties subject to refund should be determined by the

Construction Vendors and confirmed by the State Fiscal Inspectorate based on the amounts

the VAT and excise-duties paid at the moment of procuring of the petroleum products and

indicated in the fiscal invoice(s) and/or customs declaration(s) and according to the excise

duty rates then applicable.

The amount of the VAT and excise-duties should be transfered to the bank account(s) of the

Vendors opened in the banks, who have fiscal relations with budgetary system of Moldova.

The decision on refund of these taxes will be taken by the State Fiscal Inspectorate within 45

days after receiving by the State Fiscal Inspectorate of the request.

SCHEDULE E - 2
SCHEDULE F

TEMPORARY ADMISSION OF EQUIPMENT, VEHICLES, AND HOUSEHOLD

GOODS

Legal Basis for Exemption.

1. The Compact

2. Articles 7 and 68 of the Customs Code of Moldova (the "Customs

Code") (Law No. 1149-XIV, dated July 20, 2000)

3. Article 4, clause (1), Article 103, clause (2), sub-clause (c) of the Tax

Code

4. Article 28, clause (f) of the Customs Tariff Law (Law No. 1380-XIII,

dated November 20, 1997)

5. Article 5, clause (3) and Article 7 of the Law on the Manner of

Introduction into the Territory of the Republic of Moldova and Reexport of Goods by Individuals (Law No. 1569-XV dated December

20, 2002)

6. Chapter 7, Annex 1 of the Governmental Decision approving the

regulation on implementation of the customs procedures, established

by the Customs Code, No. 1140 ("Government Decision No. 1140")

dated November 2, 2005

Beneficiaries of Exemption.

MCA-Moldova, any Implementing Entity, and any Vendor importing goods on a temporary

basis to be used exclusively in furtherance of the Compact; as well as any Exempt Individual

importing equipment, vehicles, and household goods for personal use.

Procedures.

The temporary admission of equipment, vehicles, and household goods is granted by the

customs office, without payment of VAT, customs duties, excise duties, customs procedure

taxes, or any other Taxes, based on the request submitted by the beneficiary of the

exemption. The request should provide the reasons for the temporary admission of the items

in accordance with Government Decision No. 1140 and be supported by:

• a letter from MCA-Moldova, issued on official letterhead, which will

confirm that the goods are temporarily imported for the exclusive use

of the Compact or for the personal use of the Exempt Individual, and

which will contain the name of the project and the name of the

beneficiary of the exemption;
• an invoice for the goods, if applicable;

• a copy of the contract supporting the temporary admission of the

goods, if applicable;

• transportation documents (CMR, TIR carnet, Airway bill, etc.), if

applicable; and

• certificates, authorizations, licenses, if required for the importation of

goods.

Authorization for temporary admission, with the above-mentioned exemptions, will be

granted by the customs offices based on the submission of the above-mentioned documents.

Upon receipt of customs authorization, the beneficiary of the exemption will cause the

customs declaration to be prepared for submission to the customs office, whereupon the

customs office will clear the goods without payment of VAT, customs duties, excise duties,

customs procedure taxes, or any other Taxes.

If the imported goods are owned by the beneficiary of the exemption, the above-mentioned

invoices and contracts will not be required.

SCHEDULE F - 2
SCHEDULE G

EXCISE DUTY

Legal Basis for Exemption.

1. The Compact

2. Article 4, clause (1), Article 124, clause (2), sub-clause (b) and Article

124, clause (3) of the Tax Code

Beneficiaries of Exemption.

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

Procedures.

The exemption is applicable only when importing goods in furtherance of the implementation

of the Compact, which are subject to excise duties, except the procurement of petroleum

products, which is addressed in Schedule E. The exemption is granted together with the

exemptions from VAT and customs duties. In order to get the goods cleared, the beneficiary

of the exemption will submit a request for exemption, supported by:

• a letter from MCA-Moldova, issued on official letterhead, which will

confirm that the goods are imported for the exclusive use of the

Compact, and which will contain the name of the project and the name

of the beneficiary of the exemption;

• the invoice for the goods;

• a copy of the purchase order or contract for the goods;

• transportation documents (CMR, TIR carnet, Airway bill, etc.); and

• certificates, authorizations, licenses, if required for the importation of

goods.

Clearance will be granted by the customs offices with the exemption of the excise duties

based on the submission of the above-mentioned documents.
SCHEDULE H

CUSTOMS PROCEDURE TAX

Legal Basis for Exemption.

1. The Compact

2. Article 7 of the Customs Code (Law No. 1149-XIV dated July 20,

2000)

3. Annex 2 of the Customs Tariff Law (No. 1380-XIII, dated November

20, 1997)

Beneficiaries of Exemption.

MCA-Moldova, each Implementing Entity, any Vendor importing goods for use in

furtherance of the Compact, as well as any Exempt Individual importing goods for personal

use.

Procedures.

Clearance of the imported goods without customs procedure tax will be done by the customs

offices. In order to obtain clearance for imported goods, the beneficiaries of the exemption

will submit a request for such goods to be exempted from customs procedure taxes,

supported by:

• a letter from MCA-Moldova, issued on official letterhead, which will

confirm that the goods are imported for the exclusive use of the

Compact, and which will contain the name of the project and the name

of the beneficiary of the exemption;

• the invoice for the goods;

• a copy of the purchase order or contract for the goods;

• transportation documents (CMR, TIR carnet, Airway bill, etc.), if

applicable; and

• certificates, authorizations, licenses, if required for the importation of

goods.

If the imported goods are owned by the beneficiary of the exemption, the above-mentioned

invoices and contracts will not be required.

Clearance will be granted by the customs offices with the exemption from the customs

procedures tax based on the submission of the above-mentioned documents.
SCHEDULE I

OTHER TAXES

Legal Basis for Exemption.

1. The Compact

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

Beneficiaries of Exemption.

Any of MCA-Moldova, the Implementing Entities, and Vendors; as well as any Exempt

Individual, importing or acquiring property or otherwise performing an act or action within

the scope of the Compact that triggers payment of any tax included in the Tax Code, other

than those addressed in Schedules A through Schedule H above (the "Other Taxes").

Procedures.

• Whereas the Other Taxes may be chargeable not only by the tax

offices, but also by third parties as agents of the tax offices (the "Tax

Agent"), any beneficiary of exemption will require an official letter

from MCA-Moldova for the purposes of filing it with the tax office or

the Tax Agent in order to justify the claimed exemption of the relevant

Other Tax.

• The official letter from MCA-Moldova is issued on official letterhead,

which will confirm that the event that triggers payment of any Other

Tax is within the scope of the Compact, and which contains the name

of the project and the name of the beneficiary of the exemption.

• The Government will ensure that the Government actions

implementing the exemptions covered by the Compact will address the

procedures applicable to Other Taxes.