TREATIES AND OTHER INTERNATIONAL ACTS SERIES 08-917.2 

________________________________________________________________________ 

ECONOMIC ASSISTANCE 

 Millennium Challenge Compact 

 Between the 

UNITED STATES OF AMERICA 

and TANZANIA 

Signed at Dar es Salaam February 17, 2008 

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.” 
TANZANIA 

Economic Assistance 

 Millennium Challenge Compact 

 signed at Dar es Salaam February 17, 2008; 

 Entered into force September 17, 2008. 

 With annexes. 
MILLENNIUM CHALLENGE COMPACT

BETWEEN

THE UNITED STATES OF AMERICA

ACTING THROUGH

THE MILLENNIUM CHALLENGE CORPORATION

AND

THE GOVERNMENT OF THE UNITED REPUBLIC OF TANZANIA

ACTING THROUGH

THE MINISTRY OF FINANCE
MILLENNIUM CHALLENGE COMPACT

TABLE OF CONTENTS

Page

Article 1. Goal and Objectives 1

Section 1.1 Compact Goal 1

Section 1.2 Project Objectives 1

Article 2. Funding and Resources 1

Section 2.1 MCC Funding 1

Section 2.2 Compact Implementation Funding 2

Section 2.3 Disbursement 2

Section 2.4 Interest 2

Section 2.5 Government Resources; Budget 2

Section 2.6 Limitations on the Use of MCC Funding 2

Section 2.7 Taxes 3

Article 3. Implementation 3

Section 3.1 Program Implementation Agreement 3

Section 3.2 Government Responsibilities 4

Section 3.3 Policy Performance 4

Section 3.4 Government Assurances 4

Section 3.5 Implementation Letters 4

Section 3.6 Procurement 4

Section 3.7 Records; Accounting; Covered Providers; Access 5

Section 3.8 Audits; Reviews 6

Article 4. Communications 7

Section

Section

Section

4.1 Communications 7

4.2 Representatives 7

4.3 Signatures 8

Article 5. Termination; Suspension; Refunds 8

Section 5.1 Termination; Suspension 8

Section 5.2 Refunds; Violation 9

Section 5.3 Survival 9

Article 6. Compact Annexes; Amendments; Compact Status 10

Section 6.1 Annexes 10

Section 6.2 Inconsistencies 10

Section 6.3 Amendments 10

Section 6.4 Compact Status 10

Section 6.5 Additional Instruments 10
Section 6.6 References to MCC Website 10

Section 6.7 Exclusion Clause 10

Section 6.8 References to Laws, Regulations, Policies and Guidelines 10

Article 7. Entry Into Force 11

Section 7.1 Domestic Requirements 11

Section 7.2 Conditions Precedent 11

Section 7.3 Date of Entry into Force 11

Section 7.4 Compact Term 11

Article 8. Consultations 12

Section 8.1 Consultation 12

Annex I: Program Description

Annex II: Program Budget

Annex III: Summary of Monitoring and Evaluation Plan

TOC - ii
MILLENNIUM CHALLENGE COMPACT

PREAMBLE

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

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

corporation ("MCC"), and the Government of the United Republic of Tanzania (the

"Government"), acting through the Ministry of Finance (individually, each of the MCC and the

Government, a "Party" and collectively, the "Parties").

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

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

and submitted to the MCC a proposal for such assistance; and

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

objectives described herein (the "Program");

The Parties hereby agree as follows:

ARTICLE 1.

GOAL AND OBJECTIVES

Section 1.1 Compact Goal. The goal of this Compact is to advance economic growth and

poverty reduction in Tanzania through strategic investments in transportation, energy, and water

infrastructure (the "Compact Goal').

Section 1.2 Project Objectives. The objectives of the Projects (each, a "Project Objective")

are:

(a) To increase cash crop revenue and aggregate visitor spending through the

Transport Sector Project;

(b) To increase value added of businesses through the Energy Sector Project; and

(c) To increase investment in human and physical capital and reduce the prevalence

of water-related diseases through the Water Sector Project.

The Government shall take all necessary steps to achieve the Compact Goal and Project

Objectives during the Compact Term.

ARTICLE 2.

FUNDING AND RESOURCES

Section 2.1 MCC Funding. The MCC hereby grants to the Government, under the terms of

this Compact, an amount not to exceed Six Hundred Ninety-Eight Million One Hundred and

Thirty-Six Thousand United States Dollars (US$698,136,000) ("MCC Funding") for use by the

Government in the implementation of the Program, as more specifically described in Annex II to

this Compact.
Section 2.2 Compact Implementation Funding.

(a) Of the total amount of MCC Funding, the MCC shall make up to Eleven Million

Eight Hundred and Ninety-Six Thousand United States Dollars (US$11,896,000) ("Compact

Implementation Funding") available to the Government under Section 609(g) of the

Millennium Challenge Act of 2003 for:

(i) administrative activities for MCA-Tanzania (as defined below), including

start-up costs such as staff salaries, rent, cost of purchasing computers and other information

technology or capital equipment and other similar expenses; and

(ii) any other activities relating to the implementation of the Compact,

approved by the MCC.

(b) The Parties shall provisionally apply this Section 2.2, and Sections 2.6, 2.7 and

3.5 below, after the MCC and the Government sign this Compact until this Compact enters into

force under Section 7.3. Compact Implementation Funding also shall be subject to the

requirements, restrictions and procedures set out in writing by the MCC.

Section 2.3 Disbursement. In accordance with this Compact and the Program Implementation

Agreement (as defined below), the MCC shall disburse MCC Funding for expenditures incurred

in connection with the implementation of the Program (each, a "Disbursement"). The proceeds

of such Disbursements shall be made available to the Government either (a) by deposit to a bank

account established by the Government and acceptable to the MCC (a "Permitted Account") or

(b) through direct payment to the relevant provider of goods, works or services in furtherance of

this Compact, as appropriate. MCC Funding shall be expended solely to cover expenditures in

connection with the implementation of the Program as provided in this Compact and the Program

Implementation Agreement.

Section 2.4 Interest. The Government shall pay to the MCC any interest and other earnings

that accrue on MCC Funding in accordance with the Program Implementation Agreement

(whether by directing such payments to the bank account outside Tanzania designated by the

MCC or otherwise).

Section 2.5 Government Resources; Budget.

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

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

this Compact.

(b) The Government shall use its best efforts to ensure that all MCC Funding it

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

budget on a multi-year basis.

(c) The Government shall not reduce the normal and expected resources that it would

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

under this Compact and the Program.

Section 2.6 Limitations on the Use of MCC Funding. The Government shall ensure that

MCC Funding shall not be used for any purpose that would violate United States law or policy,

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as specified in this Compact or as further notified to the Government in writing by the MCC, or

by posting at www.mcc.gov ("MCC 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 environmental

guidelines posted on the MCC Website ("MCC Environmental Guidelines"); or

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

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

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

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

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

of family planning.

Section 2.7 Taxes.

(a) The Government shall ensure that the assistance provided by the MCC to the

Government under this Compact is exempt from any existing or future taxes, duties, levies,

contributions or other similar charges ("Taxes") by the Government (including any such Taxes

of a national, regional, local or other governmental or taxing authority) in accordance with the

terms of the "Agreement Providing For the Furnishing of Economic, Technical, and Related

Assistance" between the United States and the Government, entered into force on February 8,

1968.

(b) If any Tax has been levied and paid to the Government contrary to the

requirements of Section 2.7(a) above, the Government shall refund promptly to the MCC the

amount of such Tax out of its national funds, and no MCC Funding, proceeds thereof, or

Program asset may be applied by the Government in satisfaction of its obligations under this

Section 2.7(b).

ARTICLE 3.

IMPLEMENTATION

Section 3.1 Program Implementation Agreement. The Government shall implement the

Program in accordance with this Compact and as further specified in an agreement to be entered

into by the MCC and the Government, which agreement will address, among other matters,

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

procurement and applicable tax exemptions (the "Program Implementation Agreement" or

44.1)L41,).

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Section 3.2 Government Responsibilities.

(a) The Government shall have the principal responsibility of overseeing and

managing the implementation of the Program.

(b) The Government shall ensure that any assets or services funded in whole or in

part (directly or indirectly) by MCC Funding will be used solely in furtherance of this Compact

and the Program.

(c) The Government shall ensure that no law or regulation in Tanzania now or

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

performance of any of its obligations under this Compact, the PIA or any other agreement related

thereto or any transaction contemplated thereunder.

(d) The Government shall fund all costs in excess of those budgeted for the Program,

as set forth in Annex II (as such may be modified in accordance with the terms thereof), in order

to ensure the full and complete implementation of the Program.

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

reform commitments identified in Annex Ito this Compact, the Government shall commit to

maintain and improve its level of performance under the policy criteria (relating to just

governance, economic freedom and investments in people) identified in Section 607 of the

Millennium Challenge Act of 2003, and the selection criteria and methodology used by the

MCC.

Section 3.4 Government Assurances. The Government assures the MCC that:

(a) as of the date this Compact is signed by the Government, the information

provided to the MCC by or on behalf of the Government in the course of reaching agreement

with the MCC on this Compact is, taken as a whole, true, correct and complete in all material

respects;

(b) this Compact does not, and will not, conflict with any other international

agreement or obligation of the Government or any of the laws of Tanzania; and

(c) the Government shall not invoke any of the provisions of its internal law to justify

or excuse a failure to perform its duties or responsibilities under this Compact.

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

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

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

apply such guidance in implementing the Program.

Section 3.6 Procurement. Under the exception set forth in Section 4 of the Public

Procurement Act No. 21 of 2004, the Government shall ensure that the procurement of all goods,

works and services by the Government or any Provider in furtherance of this Compact will be

consistent with and conducted in accordance with the procurement guidelines notified by the

MCC to the Government in writing or by posting on the MCC Website, or otherwise made

publicly available ("MCC Program Procurement Guidelines"). The MCC Program

Procurement Guidelines include, among others, the following requirements:

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

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

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

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

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

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

timely basis; and

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

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

services.

Section 3.7 Records; Accounting; Covered Providers; Access.

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

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

documents, and other evidence relating to this Compact adequate to show, to the MCC's

satisfaction, the use of all MCC Funding ("Compact Records"). In addition, the Government

shall furnish or cause to be furnished all Compact Records to the MCC when the MCC so

requests.

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

ensure that all Covered Providers maintain, Compact Records in accordance with accounting

principles prescribed by the International Accounting Standards Committee. Compact Records

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

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

requirements.

(c) Provider; Covered Provider. Unless the Parties otherwise agree in writing, a

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

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

receives at least US$50,000 in the aggregate of MCC Funding (other than as salary or

compensation as an employee of an entity of the Government) during the Compact Term. A

"Covered Provider" is (i) a non-United States Provider that receives (other than pursuant to a

direct contract or agreement with the MCC) US$300,000 or more of MCC Funding in any

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

indirectly, US$300,000 or more of MCC Funding from any Provider in such fiscal year or (ii)

any United States Provider that receives (other than pursuant to a direct contract or agreement

with the MCC) US$500,000 or more of MCC Funding in any Government fiscal year or any

other United States person or entity that receives, directly or indirectly, US$500,000 or more of

MCC Funding from any Provider in such fiscal year.

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

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

States inspector general, the United States Government Accountability Office, any auditor

responsible for an audit contemplated herein or otherwise conducted in furtherance of this

Compact, and any agents or representatives engaged by the MCC or the Government to conduct

5
any assessment, review or evaluation of the Program, the opportunity to audit, review, evaluate

or inspect facilities and activities funded in whole or in part by MCC Funding.

Section 3.8 Audits; Reviews.

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

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

audits of all disbursements of MCC Funding in accordance with this Section 3.8(a). The initial

financial audit shall cover the period from signing of this Compact until the earlier of the

following December 31 and June 30, and all subsequent financial audits shall cover each sixmonth period thereafter ending December 31 and June 30 through the end of the Compact Term,

in each case in accordance with the terms of the PIA. Upon the MCC's request, to conduct such

audits, the Government shall use, or cause to be used, an auditor approved by the MCC and

named on the list of local auditors approved by the Inspector General of the Millennium

Challenge Corporation (the "Inspector General") or a United States–based Certified Public

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

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

Each audit shall be performed in accordance with the Audit Guidelines and be subject to quality

assurance oversight by the Inspector General. Each audit shall be completed and the audit report

delivered to the MCC no later than 90 days after the first period to be audited and no later than

90 days after each June 30 and December 31 thereafter, unless the Parties otherwise agree in

writing.

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

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

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

organization is subject to the applicable audit requirements contained in OMB Circular A-133.

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

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

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

the cognizant United States Government agency, unless the Government and the MCC agree

otherwise in writing.

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

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

to audits, consider whether a Covered Provider's audit necessitates adjustment of the

Government's records, and require each such Covered Provider to permit independent auditors to

have access to its records and financial statements as necessary.

(d) Audit by the MCC. The MCC shall have the right to arrange for and conduct

audits of the Government's use of MCC Funding.

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

costs of any audits, reviews or evaluations required under this Compact, including as reflected on

Annex II to this Compact.

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ARTICLE 4.

COMMUNICATIONS

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

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

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

To the MCC:

Millennium Challenge Corporation

Attention: Vice President for Compact Implementation

(with a copy to the Vice President and General Counsel)

875 Fifteenth Street, N.W.

Washington, DC 20005

United States of America

Facsimile: (202) 521-3700

Telephone: (202) 521-3600

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

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

To the Government:

The Government of the United Republic of Tanzania

Attention: The Permanent Secretary

Ministry of Finance

Madaraka Avenue

P.O. Box 9111

Dar es Salaam, Tanzania

Facsimile: 255 22 2110326

Telephone: 255 22 2111174

Email: ps@mof go.tz

With a copy to MCA-Tanzania:

Millennium Challenge Account-Tanzania

Attention: Chief Executive Officer

Kivukoni Front/Ohio Street

P.O. Box 8327

Dar es Salaam, Tanzania

Facsimile: 255 22 2124644

Telephone: 255 22 2124634

Email: To be designated in writing to the MCC by MCA-Tanzania

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

represented by the individual holding the position of, or acting as, the Permanent Secretary to the

Treasury, and the MCC shall be represented by the individual holding the position of, or acting

as, Vice President for Compact Implementation (each, a "Principal Representative"), each of

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

7
for all purposes other than signing amendments to this Compact. A Party may change its

Principal Representative to a new representative that holds a position of equal or higher rank

upon written notice to the other Party.

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

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

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

be.

ARTICLE 5.

TERMINATION; SUSPENSION; REFUNDS

Section 5.1 Termination; Suspension.

(a) Either Party may terminate this Compact in its entirety by giving the other Party

thirty (30) days' written notice.

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

terminate this Compact or MCC Funding under this Compact, in whole or in part, if the MCC

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

(whether in writing to the Government or by posting on the MCC 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 has occurred that, in the MCC's determination, makes

achievement of any Project Objective improbable during the term of this Compact or makes it

improbable that the Government will be able to perform its obligations under this Compact;

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

that would violate applicable law or United States Government policy, whether now or hereafter

in effect;

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

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

contrary to the national security interests of the United States;

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

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

Foreign Assistance Act of 1961 (22 U.S.C. 2151 et seq.). by reason of the application of any

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

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

criteria used to determine the eligibility of Tanzania for assistance under the Millennium

Challenge Act of 2003; and

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(vii) a person or entity receiving MCC Funding or using assets acquired in

whole or in part with MCC Funding is found to have been convicted of a narcotics offense or to

have been engaged in drug trafficking.

(c) All Disbursements shall cease upon the expiration, suspension, or termination of

this Compact; provided, however, that MCC Funding may be used, in compliance with this

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

properly incurred under or in furtherance of this Compact before such expiration, suspension or

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

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

120 days after the expiration, suspension or termination of this Compact, so long as the request

for payment of such expenditures is submitted within ninety (90) days after such expiration,

suspension or termination.

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

termination of this Compact, (i) any amounts of MCC Funding not disbursed by the MCC shall

be released from any obligation in connection with this Compact without any action from the

Government or the MCC, and (ii) any amounts of MCC Funding disbursed by MCC but not

expended under Section 2.3 before such expiration, suspension or termination, plus accrued

interest thereon, shall be returned to the MCC within thirty (30) days after the Government

receives the MCC's request for such return.

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

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

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

Section 5.2 Refunds; Violation.

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

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

Compact, the MCC shall have the right to require that the Government repay to the MCC, in

United States Dollars, the value of such misused MCC Funding, interest, earnings, or asset, plus

interest, within thirty (30) days after the Government's receipt of the MCC's request for

repayment. The Government shall use national funds (and no MCC Funding or assets of the

Program) to make such payment.

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

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

of this Compact and for a period of (i) five years thereafter or (ii) one year after the MCC

receives actual knowledge of such violation, whichever is later.

Section 5.3 Survival. The Government's responsibilities under Sections 2.4, 2.6, 2.7, 3.7, 3.8,

5.1(c), 5.1(d), 5.2, 5.3 and 6.4 of this Compact shall survive the expiration, suspension or

termination of this Compact.

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ARTICLE 6.

COMPACT ANNEXES; AMENDMENTS; COMPACT STATUS

Section 6.1 Annexes. Each annex attached hereto constitutes an integral part of this Compact.

Section 6.2 Inconsistencies. In the event of any conflict or inconsistency between:

(a) any annex to this Compact and any of Articles 1 through 8, such Articles 1

through 8 shall prevail; or

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

this Compact shall prevail.

Section 6.3 Amendments. The Parties may amend this Compact only by a written agreement

signed by the Principal Representatives of both Parties and subject to the respective domestic

approval requirements to which this Compact was subject.

Section 6.4 Compact Status. This Compact is an international agreement and, as such, will be

governed by the principles of international law.

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

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

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

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

Section 6.6 References to MCC 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 shall be deemed a reference to such

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

Section 6.7 Exclusion Clause. This Compact and the other Compact Documents (as defined

below) and the performance by the Government of any of its obligations under this Compact or

the other Compact Documents shall not be made unlawful or otherwise prevented, hindered or

adversely affected by any laws of Tanzania that come into effect after the MCC and the

Government sign this Compact.

Section 6.8 References to Laws, Regulations, Policies and Guidelines . Each reference in this

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

regulation, policy, guideline or similar document will, unless expressly set forth herein or

therein, be construed as a reference to such law, regulation, policy, guidelines or similar

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

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

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

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ARTICLE 7.

ENTRY INTO FORCE

Section 7.1 Domestic Requirements. The Government shall take all steps necessary to ensure

that (a) this Compact and the PIA and all of the provisions of this Compact and the PIA are valid

and binding and are in full force and effect in Tanzania, and (b) no laws of Tanzania (other than

the constitution of Tanzania), whether now or hereafter in effect, will take precedence or prevail

over the terms of this Compact or the PIA.

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

(a) the Government and the MCC shall execute the PIA;

(b) the Government shall deliver to the MCC:

(i) a certificate signed and dated by the Principal Representative of the

Government (or such other duly authorized representative of the Government acceptable to the

MCC) certifying that the Government has taken all steps required under Section 7.1;

(ii) an opinion from the Attorney General of Tanzania, in form and substance

satisfactory to the MCC, that states, among other things, (1) each of the Compact, the PIA and

any other agreement entered into in connection with this Compact to which the Government and

the MCC are parties (the "Compact Documents") have been duly authorized, executed and

delivered by the Government, (2) each Compact Document and all of the provisions of each

Compact Document are valid and binding and are in full force and effect in Tanzania, (3) each

Compact Document has the status, if stipulated in such agreement, of an international agreement,

(4) each Compact Document (and the execution, delivery and performance by the Government of

each) does not and will not conflict with any other international agreement or obligation of the

Government or any of the laws of Tanzania, and (5) MCA-Tanzania has been duly established as

an independent accountable entity, is validly existing as an office of the Government, and has the

power and authority to perform the functions and carry out the obligations contemplated by the

Compact Documents; and

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

governmental documents relating to its domestic requirements for this Compact to enter into

force and the satisfaction of the requirements of Section 7.1, which the MCC may post on the

MCC Website or otherwise make publicly available; and

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

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

MCC Funding.

Section 7.3 Date of Entry into Force. This Compact shall enter into force on the later of (a)

the date of the last letter in an exchange of letters between the Principal Representatives

confirming that each Party has completed its domestic requirements for entry into force of this

Compact and (b) the date that all conditions set forth in Section 7.2 have been satisfied.

Section 7.4 Compact Term. This Compact shall remain in force for five years after its entry

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

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ARTICLE 8.

CONSULTATIONS

Section 8.1 Consultation. Either Party may, at any time, request consultations relating to the

interpretation or implementation of this Compact or any relevant supplemental agreement

between the Parties. Such consultations shall begin at the earliest possible date. The request for

consultations shall designate a representative for the requesting Party with the authority to enter

consultations and the other Party shall endeavor to designate a representative of equal or

comparable rank. If such representatives are unable to resolve the matter within thirty (30) days

from the commencement of the consultations, then each Party shall forward the consultation to

the Principal Representative or such other representative of comparable or higher rank. The

consultations shall last no longer than sixty (60) days from date of commencement. If the matter

is not resolved within such time period, either Party may terminate this Compact pursuant to

Section 5.1(a). The Parties shall enter any such consultations guided by the principle of

achieving the Compact Goal in a timely and cost-effective manner and by the principles of

international law. Any dispute arising under or related to this Compact shall be determined

exclusively through the consultation mechanism set forth in this Section 8.1.

SIGNATURE PAGE BEGINS ON THE NEXT PAGE

12
IN WITNESS WHEREOF, the undersigned, duly authorized by their respective

governments, have signed this Compact this 17 th day of February, 2008.

Done at Dar es Salaam, Tanzania

FOR MILLENNIUM CHALLENGE FOR THE GOVERNMENT OF THE

CORPORATION, ON BEHALF OF THE UNITED REPUBLIC OF TANZANIA

UNITED STATES OF AMERICA

Gr orge W : ush Jakaya Mrisho Kikwete

residen of the United States of America President of the United Republic of Tanzania
ANNEX I

PROGRAM DESCRIPTION

A. OVERVIEW

This Annex Ito this Compact describes the Program that MCC Funding will support in Tanzania

during the Compact Term. The Program will include the Transport Sector Project, the Energy

Sector Project and the Water Sector Project (each, a "Project") and the activities related to the

Projects (each, a "Project Activity") as described in this Annex I.

1. Background.

The United Republic of Tanzania ("Tanzania"), comprised of the mainland and Zanzibar, is

surrounded by eight countries (consisting of Kenya, Uganda, Rwanda, Burundi, Democratic

Republic of Congo, Zambia, Malawi, and Mozambique) and the Indian Ocean. Tanzania is a

country of approximately 39 million people. Nearly 36 percent of the mainland population and

49 percent of the Zanzibar population live below the poverty line. An inadequate transportation

network, an inadequate and unreliable supply of energy and a shortage of potable water are three

key constraints to economic growth and private investment in Tanzania. The Program is

designed specifically to address these constraints.

2. Program.

The Program consists of the Transport Sector Project, the Energy Sector Project, and the Water

Sector Project, as further described below.

The Parties may agree to modify or eliminate any Project or Project Activity, or to create a new

project or project activity, in writing signed by the Principal Representative of each Party

without amending this Compact; provided, however, that any such modification or elimination of

a Project or Project Activity, or creation of a new project or project activity, shall not cause the

amount of MCC Funding to exceed the aggregate amount specified in Section 2.1 of this

Compact, cause the Government's responsibilities or contribution of resources to be less than

specified in this Compact, or extend the Compact Term.

3. Consultative Process.

The consultative process for the Program was informed by, and anchored in, the consultative

process conducted in connection with the Government's National Strategy for Growth and

Reduction of Poverty which was finalized in 2005 (commonly referred to by the Swahili

acronyms "MKUKUTA" and "MKUZA," for the mainland and Zanzibar, respectively). The

Government organized national outreach activities and held various meetings relating to the

Program proposal with key stakeholders, including representatives from local governments,

members of parliament, and non-governmental organizations. The Government also engaged the

media to inform the public about the proposal for Millennium Challenge Account assistance with

a series of press releases, radio and television interviews, and press conferences.
4. Environmental and Social Sustainability.

Tanzania enjoys a complex and rich environmental and social resource base. In order to achieve

long-term sustainable growth and to achieve maximum Program impact, these natural resources

(including abundant wildlife and ecological diversity, cultural resources, and coastal and marine

life) will be safeguarded through the implementation of several programmatic and sectoral

mitigation measures for the Compact Term, as follows:

(a) The Government shall comply with MCC Environmental Guidelines and the

gender policy delivered by the MCC to the Government or posted on the MCC Website or

otherwise publicly made available (the "MCC Gender Policy"). The Government also shall

adhere to Tanzanian environmental laws and regulations, including the Government of Tanzania

National Environmental Policy of 1997, the 2004 Environmental Management Act, and the 2005

Environmental Impact Assessment and Audit Regulations. In addition, for projects on Zanzibar,

the Government shall ensure that all implementing entities comply with the 1992 National

Environmental Policy for Zanzibar and the Environmental Management for Sustainable

Development Act (No. 2 of 1996).

(b) On-Going Consultation. To ensure the environmental and social sustainability of

the Program, MCA-Tanzania shall develop and implement plans for comprehensive public

consultations in which various stakeholders in the Program (including women and other

underrepresented groups) are afforded meaningful consultation and opportunities to provide their

inputs to the design and implementation of the Program, which public consultations will

primarily be conducted by the special consultative committees described in Section 2(c) of part E

of this Annex I. In compliance with the MCC Environmental Guidelines, all environmental and

social impact assessments ("ESIAs") and all other relevant environmental and social assessment

documentation will be posted on the MCA-Tanzania website.

(c) Gender Integration Action Plan. To maximize the positive social impacts of the

Program, MCA-Tanzania shall develop and implement a gender integration plan (for both the

mainland and Zanzibar) that includes, among other things, approaches for meaningful and

inclusive consultations with women and other underrepresented groups, a gender analysis for

each Project Activity, as appropriate, and strategies for incorporating findings of the gender

analysis into the design of each such Project Activity (the "Gender Integration Action Plan").

The Gender Integration Action Plan will be posted on the MCA-Tanzania website.

(d) HIV/AIDS Awareness. MCA-Tanzania shall develop and implement an action

plan for incorporating targeted HIV/AIDS awareness programs into all phases of implementation

of the Program. Such action plan specifically shall ensure (i) the incorporation of the HIV/AIDS

awareness programs into the terms of reference (and the bidding documents) for the relevant

contractors (including design or supervisory firms, construction firms, independent technical

auditing firms and any project management advisors) and (ii) independent monitoring of each

such contractor's compliance with these awareness programs throughout the Compact Term.

(e) Capacity Building; Resource Management. MCC Funding may be used:

(i) To provide capacity building to the National Environmental Management

Council ("NEMC') and the Zanzibar Department of Environment ("ZDOE") in order (1) to

enhance both NEMC's and ZDOE's abilities to address issues arising in connection with the

ANNEX I - 2
implementation of the Program and (2) to support MCA-Tanzania's hiring of an environmental

and social oversight consultant to assist MCA-Tanzania in ensuring their compliance with

various environmental and social requirements under the Compact; and

(ii) To support community-based natural resource and wildlife management

programs being undertaken by other donors, particularly where deforestation, wildlife migration

and trafficking risks have been identified as possible in connection with the implementation of

certain Project Activities.

(f) Mitigation Measures. MCC Funding will be used to implement all environmental

and social mitigation measures identified in the relevant environmental assessments (or as

otherwise may be appropriate) of the Program, including (i) up to a maximum amount specified

by the MCC, compensation for physical and economic displacement of individuals, residences

and businesses affected by the rehabilitation, consistent with the World Bank's Operational

Policy 4.12, (ii) implementation of HIV/AIDS awareness plans, and (iii) continuing advocacy,

training and support for community-based resource management.

5. Proposals.

Public solicitations for proposals are anticipated to procure goods, works and services, as

appropriate, to implement all Projects. MCA-Tanzania will develop, subject to MCC approval, a

process for consideration of all such proposals. Notwithstanding the foregoing, MCA-Tanzania

also may consider, using a process developed by MCA-Tanzania and approved by the MCC, any

unsolicited proposals it receives.

B. TRANSPORT SECTOR PROJECT

1. Background.

Transportation infrastructure in Tanzania is inadequate to meet the needs of the country's widely

dispersed population; less than seven percent of Tanzania's roads are bitumen surfaced, with the

remainder gravel or earth. The Transport Sector Project addresses this constraint to growth by

reducing transport costs and travel times, which will facilitate access to social services and

markets and will increase tourism potential. Additionally, in areas where the roads are currently

impassable for certain parts of the year, road rehabilitation will provide year-round access to

markets, thus facilitating increased agricultural activity.

Similarly, access to Mafia Island is limited by the poor condition of its airport and lack of

feasible alternative transportation options. Resurfacing the airport's runway and improving other

airport facilities will allow for easier, more efficient, and safer access to the island, resulting in

increased tourist and business travel to and from the mainland and additional jobs on the island.

2. Project.

The Transport Sector Project consists of the following Project Activities:

(a) Mainland Trunk Roads Activity.

MCC Funding will be used to make improvements to three trunk roads on the mainland.

Improvement of any such trunk roads will only be undertaken under this Compact and funded

ANNEX I - 3
with MCC Funding if all necessary construction and construction supervision contracts for such

trunk road are executed and in effect prior to the first anniversary of the entry into force of this

Compact. Specifically, MCC Funding will support:

(i) Rehabilitation of the following three trunk roads:

(1) Tanga – Horohoro Road. Upgrading from gravel to asphalt

concrete of the 68 km stretch of highway located in northeast

Tanzania connecting the seaport of Tanga with Horohoro at the

Kenyan border;

(2) Tunduma – Sumbawanga Road. Upgrading from gravel to double

bituminous surfacing of the southernmost 224 km stretch of the T9

trunk road (known as the western corridor), with the exception of

the approximately two km stretch in Tunduma and the

approximately eight km stretch in Sumbawanga, both of which will

be paved with asphalt concrete; and

(3) Mtwara Corridor. Upgrading from earth to double bituminous

surfacing two sections of the Mtwara Corridor (known as the

southern corridor) consisting of (A) the 61 km stretch between

Namtumbo and Songea and (B) 78 km stretch from Peramiho

Junction (that is about 20 km west of Songea) to Mbinga.

(ii) Construction supervision of all rehabilitated roads under the Mainland

Trunk Roads Activity.

(iii) Additional environmental assessments, together with any resulting

resettlement action plans ("RAPs") (consistent with World Bank Operational Policy 4.12) and

environmental management plans ("EMPs"), each as satisfactory to the MCC, and wildlife

migration studies and aforementioned community-based natural resource and wildlife

management programs, as needed.

(iv) Capacity building for the Tanzania National Road Agency

("TANROADS") related to new staff and equipment required to manage the Mainland Trunk

Roads Activity.

(v) Assistance to TANROADS in preparation of design documentation and

bid packages.

TANROADS will be the Implementing Entity (as defined below) for the Mainland Trunk Roads

Activity.

(b) Zanzibar Rural Roads Activity.

MCC Funding will be used to make improvements to selected rural roads on the Zanzibar island

of Pemba. Specifically, MCC Funding will support:

(i) Feasibility studies, final design, and any additional environmental and

social assessments, together with any resulting RAPs (consistent with World Bank Operational

ANNEX I - 4
Policy 4.12) and EMPs, each as needed and as satisfactory to the MCC, of the following five

roads (each identified together with its approximate length): (1) Mzambarauni Takao – Finya

Road (8.3 km), (2) Mzambarauni Karimu – Mapofu Road (8.3 km), (3) Bahanasa – DayaMtambwe Road (13.1 km), (4) Chwale – Kojani Road (two km) and (5) Kipangani – Kangagani

Road (three km).

(ii) Rehabilitation and posting of signage and incorporation of other safety

improvements of the roads selected from the five roads described in Section 2(b)(i) above based

on, among others, technical construction plans capable of being completed during the Compact

Term, reasonable conformity to the priorities of Zanzibar's transportation master plan, and an

economic rate of return methodology acceptable to the MCC (agreed upon between the Parties

prior to the commencement of any feasibility study described in Section 2(b)(i) above).

(iii) Project management and construction supervision of all rehabilitated roads

under the Zanzibar Rural Roads Activity.

An engineering firm will be hired, following an international competitive procurement and

selection process, to implement this Project Activity. The Government will ensure that the

Ministry of Communications and Transport of Zanzibar cooperates with MCA-Tanzania to

oversee this selected firm.

(c) Road Maintenance Activity.

MCC Funding will be used to enhance Tanzania's capacity to maintain its road network.

Specifically, MCC Funding will support priority institutional and capacity limitations, as

identified and agreed to by the MCC and the Government prior to the second anniversary of the

entry into force of this Compact. Such support may be provided, among other ways, in

improvements of strategic maintenance planning, and management of routine and periodic

maintenance contracts of TANROADS and the Ministry of Communication and Transport of

Zanzibar.

(d) Mafia Island Airport Activity.

MCC Funding will be used to rehabilitate and upgrade the airport on Mafia Island. MCC

Funding will support:

(i) Refurbishment of the runway, apron and taxiway, establishment of

boundary security, refurbishment of the fire station, refurbishment of the terminal building and

its water supply, and installation of communication equipment, the scale and scope of which will

be contingent on the findings of a strategic environmental assessment.

(ii) Project coordination and construction supervision for the activities

described in Section 2(d)(i) above.

(iii) Additional environmental assessments, together with any resulting RAPs

(consistent with World Bank Operational Policy 4.12) and EMPs, each as needed and as

satisfactory to the MCC.

ANNEX I - 5
(iv) Capacity building at the Tanzania Airports Authority ("TAA") related to

improvements in strategic maintenance planning and management of routine and periodic

maintenance contracts.

TAA will be the Implementing Entity for the Mafia Island Airport Activity.

3. Beneficiaries.

The upgrading of mainland and Zanzibar roads will benefit users of the roads directly by

reducing transportation costs and travel times. In addition, individuals living near the roads will

indirectly benefit from increased access to social services and markets. The improvements to the

Mafia Island airport will directly benefit approximately 12,000 passengers traveling to the island

each year, while indirectly benefiting the population of the island, particularly those engaged in

the service sector.

4. Donor Coordination; Role of Private Sector and Civil Society.

The MCC, together with the Government, will continue to pursue opportunities to coordinate

with the "Joint Technical Committee," the principal development partner for projects in the

transportation sector in Tanzania, consisting of representatives from the European Union, World

Bank, African Development Bank ("AfDB") and the governments of Norway, Denmark and

Japan. The mainland roads included in the Transport Sector Project originated in the

Government's ten-year "Transport Sector Investment Program" (also known as "TSIP"), which

has been reviewed, discussed and approved by the Joint Technical Committee and other

stakeholders.

The implementation of the Mafia Island Airport Activity will be coordinated with the feasibility

study, the ESIA and design for Tanzanian airport upgrades (including airside pavements and

other facilities) currently being funded by the World Bank.

Private sector firms are expected to participate in the bids, and perform, studies, design,

construction, and construction supervision associated with the Transport Sector Project.

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

While the USAID currently does not focus specifically on Tanzania's transportation sector, the

MCC and the USAID, with the cooperation of the Government, will work to identify potential

opportunities for coordination on the Transport Sector Project, including opportunities for

community-based natural resource and wildlife management programs within those regions

affected by roads rehabilitated under the Transport Sector Project.

6. Sustainability.

In order to provide continued institutional support for the Transport Sector Project, the

Government will undertake certain commitments described in Section 7 below. The Road

Maintenance Activity will enhance the Transport Sector Project's sustainability by improving the

Government's capability to perform maintenance (both on the mainland and on Zanzibar). The

Government is expected to commit additional resources to maintain the roads rehabilitated under

the Transport Sector Project. While it is unlikely that the Transport Sector Project will result in

any significant negative environmental and social impacts, the potential direct, indirect, induced,

ANNEX I - 6
and cumulative environmental impacts of the Transport Sector Project will be examined through

the execution of appropriate environmental assessments to be conducted during the final design

phase of the Project Activities of the Transport Sector Project, and appropriate mitigation

measures will be implemented. The Mafia Island Airport Activity will be subject to the results

of a strategic environmental assessment. This assessment will help ensure that all MCC

investments in the airport result in improved conditions for tourism and private sector growth

and are implemented in the context of sustainable long-term development with a focus on natural

resource and wildlife management.

7. Policy, Legal and Regulatory Reforms.

The implementation by the Government, to the satisfaction of the MCC in its discretion, of the

policy, legal and regulatory reforms described below shall be conditions precedent to the

specified Disbursements.

(a) Prior to the initial disbursement of MCC Funding for the Mainland Roads

Activity, the National Road Act (as submitted to the President for Signature in July 2007) shall

have been enacted, and is in full force and effect, and the National Road Safety Policy and

Strategy (in form and substance as prepared by the Ministry of Infrastructure Development in

May 2007) shall have been adopted by the Government.

(b) In the interest of long-term sustainability of the mainland roads network, the

Government's expenditures for road maintenance shall be increased each Tanzanian fiscal year

during the Compact Term, which increase will take into account inflation and maintenance needs

of existing, improved and newly constructed roads.

(c) In the interest of long-term sustainability of the Zanzibar roads network, the

Government of Zanzibar's expenditures for road maintenance shall be increased each Tanzanian

fiscal year during the Compact Term, which increase will take into account inflation and

maintenance needs of existing, improved and newly constructed roads.

(d) Prior to the initial disbursement of MCC Funding for construction on the

Mainland Roads Activity, the Government shall finalize the TSIP or any shorter-term plan based

on the TSIP acceptable to the Joint Technical Committee that provides funding priority to those

projects identified in the TSIP.

(e) Prior to the initial disbursement of MCC Funding for construction on the

Mainland Roads Activity, the Government shall prepare and begin implementation of a plan, in

consultation with the Joint Technical Committee, for future legislative reform in the

transportation sector, including the increased autonomy of TANROADS.

C. ENERGY SECTOR PROJECT

1. Background.

Tanzania has one of the lowest electrification rates in the world, with only about ten percent of

the population benefiting from electric power service. Where electricity is available, the quality

of supply is poor and blackouts and service interruptions are common. Consequently,

businesses, individuals, and service providers suffer from the lack of access to reliable,

affordable and modern energy services. The Energy Sector Project aims to improve the quality

ANNEX I - 7
and increase the quantity of electricity to businesses and households, thereby increasing

investment potential. The Energy Sector Project will add new supply and transmission capacity

to improve reliability and quality of energy and new distribution capacity to extend access to

electricity to communities and businesses not currently served with electricity.

2. Project.

The Energy Sector Project consists of the three Project Activities described below. Tanzania

Electric Supply Company Limited ("TANESCO") will be the Implementing Entity for each

Project Activity of the Energy Sector Project. For the Zanzibar Interconnector Activity,

TANESCO will coordinate and consult with Zanzibar Electricity Corporation ("ZECO").

(a) Zanzibar Interconnector Activity.

MCC Funding will be used to increase the electric power supply to Zanzibar's Unguja Island by

laying a submarine transmission cable, to make associated investments to increase the capacity

of certain overhead transmission lines and to rehabilitate the main substation near Zanzibar

Town. Specifically, MCC Funding will support:

(i) Final design, and an environmental assessment, together with any

resulting RAPs (consistent with World Bank Operational Policy 4.12) and EMPs, each as needed

and as satisfactory to the MCC, and occupational health and safety standards.

(ii) Construction and installation of an approximately 40 km-long, 132kV,

100MW capacity submarine electric transmission cable (including telecom fiber optic shield

wire) from Ras Kiromoni on the mainland to Ras Fumba on Unguja Island.

(iii) Installation of a 132kV switchgear at Ubungo substation and laying of an

approximately 20 km-long, supplementary 132kV overhead line along an existing transmission

line from Ubungo to Ras Kiromoni.

(iv) Laying of an approximately 22 km-long, supplementary 132kV overhead

line along an existing transmission line from Ras Fumba to Mtoni substation.

(v) Adding 120MVA of 132/33kV transformation capacity to the Mtoni

substation on Unguja Island.

(vi) Capacity building and technical support for TANESCO and ZECO,

including assistance with preparation of engineering design and bidding documents, tender

review, supervision of construction, project management, and quality control.

(vii) Project coordination and construction supervision of all improvements and

upgrades under the Zanzibar Interconnector Activity.

(b) Malagarasi Hydropower and Kigoma Distribution Activity.

MCC Funding will be used to construct a small (up to eight MW) run-of-river hydropower plant

on the Malagarasi River at Igamba Falls, and to construct a transmission and distribution

network along the Kigoma, Uvinza and Kasulu corridor to serve approximately 21,000

customers. Specifically, MCC Funding will support:

ANNEX I - 8
(i) Final design, and supplemental environmental and social assessments

consistent with the sustainability issues identified below, together with any resulting RAPs

(consistent with World Bank Operational Policy 4.12) and EMPs, each as needed and as

satisfactory to the MCC, and occupational health and safety standards.

(ii) Engineering and construction of (1) civil works including an

approximately 24 km access road, a 300 m long concrete faced rockfill dam (of which about 200

m will be eight m high), and an approximately 650 m long headrace canal, (2) electromechanical works including the powerhouse consisting of turbines, eight MW of power

generators and a voltage step-up substation, and (3) hydro-mechanical works including intake

gates, bottom outlets, and two steel penstocks (estimated to be 110 m long).

(iii) Engineering and construction of (1) transmission and distribution line

extensions including up to 392 km of 33kV distribution lines, ten km of 11kV lines, and 171 km

of low voltage lines to distribute power generated at the hydropower plant described in this

Section 2(b) to Kigoma, Uvinza, Kasulu and small settlements along the corridor, and (2)

associated upgrades including step-down substations, electrical protection and related minor civil

works.

(iv) Capacity building and technical support for TANESCO, including

assistance with preparation of the engineering design and bidding documents, tender review,

supervision of construction, project management, and quality control.

(v) Project coordination and construction supervision of all improvements and

upgrades under the Malagarasi Hydropower and Kigoma Distribution Activity.

(vi) Assessment and design of a public-private partnership for the independent

operation of the mini-grid system in Kigoma which includes the hydropower plant, transmission

and distribution network, and service delivery, and competitive procurement of an operator

concessionaire.

(c) Distribution Systems Rehabilitation and Extension Activity.

MCC Funding will be used to rehabilitate existing power distribution assets and to extend the

distribution network in six regions (consisting of Mwanza, Iringa, Mbeya, Dodoma, Tanga and

Morogoro) to serve approximately 215,000 customers. Specifically, MCC Funding will support:

(i) Final design, and environmental and social assessment frameworks,

together with any resulting RAPs (consistent with World Bank Operational Policy 4.12) and

EMPs, each as needed and as satisfactory to the MCC, and occupational health and safety

standards.

(ii) Construction of up to 247 distribution line extensions consisting of new

33kV, 11kV, and low voltage lines and customer connections in the six regions.

(iii) Reinforcement and rehabilitation of up to 22 substations in the six regions,

including new and replacement transformers and switchgear.

ANNEX 1- 9
(iv) Capacity building and technical support for TANESCO, including

assistance with preparation of the engineering design and bidding documents, tender review,

supervision of construction, project management, and quality control.

(v) Project coordination and construction supervision of all improvements and

upgrades under the Distribution Systems Rehabilitation and Extension Activity.

3. Beneficiaries.

The total number of beneficiaries of the Energy Sector Project by 2020 is estimated to be

252,000 households and businesses receiving better quality and availability of electricity, as well

as approximately 88,000 previously un-served households and businesses receiving electricity

for the first time.

The Malagarasi Hydropower and Kigoma Distribution Activity is expected to directly benefit

approximately 13,000 newly served households and businesses by 2020 through new

connections to the electricity grid; an additional 7,000 households, businesses and institutions

(such as port operations, fish and agricultural processing facilities, tourism facilities, and a

hospital) are likely to benefit from power that is more available and reliable, less costly, and of

better quality. In addition, the Distribution Systems Rehabilitation and Extension Activity is

expected to reach approximately 47,000 beneficiaries through newly served households and

businesses by 2020 and 187,000 beneficiaries through existing households and businesses.

Agricultural processing, small-scale retail and the service industry (such as commercial retailers

and restaurants) are among the main sectors that will benefit from the availability of increased,

more reliable, and better quality power supply. The Zanzibar Interconnector Activity is expected

to provide significant benefits to energy consumers in Unguja and to assist growth in its vital

tourism sector.

4. Donor Coordination; Role of Private Sector and Civil Society.

Donors, including the governments of Sweden, Norway, Japan, the World Bank and the AfDB,

among others, play an active role in improving Tanzania's energy sector through technical

assistance and infrastructure projects. The Energy Sector Project has benefited significantly

from these donors' activities. For example, the Malagarasi hydropower plant project benefited

from a pre-feasibility study financed by the AfDB. The MCC's due diligence review of the

Distribution Systems Rehabilitation and Extension Activity benefited from active support of the

Swedish International Development Cooperation Agency and the World Bank.

The Government has been engaged in an extensive consultative process that allowed civil

society, along with the business community, to discuss local needs and priorities relating to the

Energy Sector Project. Such consultation is expected to continue during the implementation of

the Energy Sector Project.

5. USAID.

The USAID currently does not have activities specifically in Tanzania's energy sector.

However, as appropriate, the MCC and the USAID, with the cooperation of the Government,

will work to identify potential opportunities for coordination on the Energy Sector Project,

especially in connection with community-based natural resource and wildlife management

programs in proximity to the Project Activities of the Energy Sector Project.

ANNEX I - 10
6. Sustainability.

To enhance institutional sustainability of the Energy Sector Project, the Government will

undertake certain reforms described in Section 7 below. Hiring of qualified engineering, design,

construction and supervisory firms to implement the Energy Sector Project, and provision of

necessary technical assistance to TANESCO is expected to contribute to the sustainability of the

Energy Sector Project as well.

While it is unlikely that the Energy Sector Project will result in any significant negative

environmental impacts, the potential direct, indirect, induced, and cumulative environmental

impacts of the Energy Sector Project will be examined through the execution of appropriate

environmental assessments to be conducted during the final design phase of the Energy Sector

Project, and will be addressed through implementation of appropriate mitigation measures.

Specifically, potentially significant resettlement issues associated with the current transmission

line design under the Zanzibar Interconnector Activity will be mitigated through rerouting of the

cable through open or less densely populated areas. In addition, under the Malagarasi

Hydropower and Kigoma Distribution Activity, detailed studies will be required to assess the

impact of reduced water flows and determine minimum ecological flows, to assess needs for fish

migration to spawning grounds, and to study water quality impacts and potential impacts of

water-related diseases. Detailed access road alignments and distribution line alignments will be

completed and assessed, and land acquisition needs confirmed to allow for the preparation of a

RAP. Further study on the Malagarasi hydropower plant's relationship with other proposed

hydropower and irrigation activities on the Malagarasi River and potential cumulative effects, if

any, will be required, in addition to considerations of both upstream and downstream usage. The

environmental assessment to be undertaken in connection with the Distribution Systems

Rehabilitation and Extension Activity will include special attention to the Iringa site, in which

some of the distribution lines will cross within the boundaries of the Ruaha National Park.

7. Policy, Legal and Regulatory Reforms.

The implementation by the Government, to the satisfaction of the MCC in its discretion, of the

policy, legal and regulatory reforms described below shall be conditions precedent to the

specified Disbursements.

(a) An Electricity Act, agreeable to stakeholders including the MCC, is enacted and

in full force and effect prior to the initial disbursement of MCC Funding for the Energy Sector

Project.

(b) The Government shall support TANESCO's corporate objective of moving

towards financial self-sufficiency through, at a minimum, tariff reform that reflects full cost

recovery, prior to the initial disbursement of MCC Funding for the Energy Sector Project.

(c) The Government shall ensure that the composition of TANESCO's board of

directors is such that a majority of board members are independent and professional members,

with private sector representation, prior to the initial disbursement of MCC Funding for the

Energy Sector Project.

ANNEX I - 11
D. WATER SECTOR PROJECT

1. Background.

Tanzania faces a serious shortage of access to potable water, resulting in a high incidence of

water-related diseases, decreased workforce productivity, and constrained business growth. The

Water Sector Project includes investments in bulk water supply for two urban areas, Dar es

Salaam and Morogoro, which investments will increase the quantity and reliability of potable

water for domestic and commercial use. By increasing the volume of water supply, the Water

Sector Project is expected to reduce the incidence of water-related disease, increase time

available for productive activities including education, promote greater investments in physical

capital, and, ultimately, lead to an increase in income.

2. Project.

The Water Sector Project consists of the three Project Activities described below. These Project

Activities are expected, individually and jointly, to improve significantly the water supply to Dar

es Salaam and Morogoro as described below.

(a) Lower Ruvu Plant Expansion Activity.

MCC Funding will be used to expand the capacity of the Lower Ruvu water treatment plant

serving the Dar es Salaam area, from about 180 million liters per day to approximately 270

million liters per day. Specifically, MCC Funding will support:

(i) Feasibility studies, final design and an environmental and social

assessment , together with any resulting RAPs (consistent with World Bank Operational Policy

4.12) and EMPs, each as needed and as satisfactory to the MCC, and occupational health and

safety standards.

(ii) Raw water system (e.g., grit chamber and pumps), treatment system (e.g.,

flow diversion chamber, crossflow clarifier, declining rate filters, and chemical feed facilities),

treated water system (e.g., high service pump station and clearwell), power and controls system,

and solid handling facility (e.g., sludge lagoon system).

(iii) Capacity building and technical support for Dar es Salaam Water and

Sewerage Authority ("DAWASA").

(iv) Project coordination and construction supervision of all improvements and

upgrades under the Lower Ruvu Plant Expansion Activity.

DAWASA will be the Implementing Entity for the Lower Ruvu Plant Expansion Activity.

(b) Non-Revenue Water Activity.

MCC Funding will be used to improve the system efficiencies of DAWASA through reduction

of non-revenue water via reduction in physical leaks and commercial losses. Specifically, MCC

Funding will support:

ANNEX I - 12
(i) A comprehensive assessment of both (1) the locations and volumes of

physical leaks and (2) billing and collection deficiencies and losses.

(ii) An environmental assessment, together with any resulting RAPs

(consistent with World Bank Operational Policy 4.12) and EMPs, each as needed and as

satisfactory to the MCC.

(iii) Preparation of a performance-based contract with, and a procurement of, a

private operator that will implement the non-revenue water reduction program based on specific

benchmarks established in the assessment described in Section 2(b)(i) above.

(iv) Capacity building and technical support for Dar es Salaam Water and

Sewerage Company ("DAWASCO") and DAWASA pertaining to the performance-based

contract described in Section 2(b)(iii) above and system-wide planning and operations.

(v) Project coordination and construction supervision of all improvements and

upgrades under the Non-Revenue Water Activity.

DAWASA is expected to be the Implementing Entity for the Non-Revenue Water Activity.

(c) Morogoro Water Supply Activity.

MCC Funding will be used to improve water supply in Morogoro and to help Morogoro Water

and Sewarage Authority ("MORUWASA") move towards achieving financial sustainability.

Specifically, MCC Funding will support:

(i) Revised master plan, feasibility studies, final design and an additional

environmental assessment, together with any resulting RAPs (consistent with World Bank

Operational Policy 4.12) and EMPs, each as needed and as satisfactory to the MCC.

(ii) Rehabilitation of Mambogo water intake and water treatment plant,

including a water treatment plant with approximate capacity of 6,000,000 million liters per day,

and associated works.

(iii) Improvements of water transfer in the existing distribution network,

including rehabilitation of Mafiga water treatment plant facilities, about 1.9 km of pressure main,

and associated works.

(iv) Capacity building and technical support for MORUWASA.

(v) Project coordination and construction supervision of all improvements and

upgrades under the Morogoro Water Supply Activity.

MORUWASA will be the Implementing Entity for the Morogoro Water Supply Activity.

3. Beneficiaries.

The Water Sector Project is expected to benefit approximately 616,000 households in Dar es

Salaam and approximately 51,000 households in Morogoro by providing better quality and more

reliable water supply. Businesses relying on network water will also benefit from these service

ANNEX I - 13
improvements. Benefits from the Project Activities under the Water Sector Project include

reductions in water-related disease, increased time available for productive activities such as

labor and education, and increased investments in physical and human capital.

4. Donor Coordination; Role of Private Sector and Civil Society.

All the components of the Water Sector Project are priority projects identified under the Water

Sector Development Program 2006-2025 ("WSDP"). The WSDP was designed under the sector

wide approach to planning with the objectives of equity of water access, water managment

capacity, and proper maintenance of water and sanitation sytstems, use of environmentally sound

technologies and effective water tariffs, billing and revenue collection mechanism. The donors

participating in the WSDP include the governments of Germany, the Netherlands, France, and

Japan as well as the United Nations Development Programme, the United Nations Children's

Fund, Food and Agriculture Organization and the AfDB (collectively referred to as the

"Development Partners Group - Water"). The MCC has been coordinating with the

Development Partners Group - Water, and will continue to explore opportunities to use various

features of the WSDP, to the maximum extent possible, in order to reduce transaction costs and

avoid building parallel structures.

Private sector firms are expected to participate in the bids, and perform, studies, design,

construction, and construction supervision associated with the Water Sector Project.

5. USAID.

Various USAID projects in Tanzania include components related to the water sector, although no

current USAID program is exclusively focused on the water sector. The USAID is actively

engaged in water policy matters in Tanzania, including through the USAID's participation in the

Development Partners Group - Water. The MCC expects to work with the USAID to identify

potential opportunities for coordination with respect to the Water Sector Project.

6. Sustainability.

By strengthening and enhancing operations of the water and sewerage authorities in two major

urban locations, the Water Sector Project seeks to enhance the sustainable operation of

Tanzania's water sector. The water and sewerage authorities will be required to submit rate

cases aimed at achieving operational and maintenance financial sustainability within the

Compact Term and a sustainable trend for recovery of asset depreciation. While it is unlikely

that the Water Sector Project will result in any significant negative environmental impacts, the

potential direct, indirect, induced, and cumulative environmental impacts of the Water Sector

Project will be examined through the execution of appropriate environmental assessments to be

conducted during the final design phase of the Water Sector Project, and appropriate mitigation

measures will be implemented. For those Project Activities of the Water Sector Project that

relate to water supply, MCA-Tanzania will ensure that feasibility studies include efforts to

identify the most appropriate and environmentally sustainable water sources to meet future

demand and are available to the poor. In addition, MCA-Tanzania will ensure that EMPs are

developed, implemented and monitored for all Project Activities of the Water Sector Project,

each in accordance with the provisions of this Compact and any relevant supplemental

agreements. MCA-Tanzania also will pay particular attention to gender issues to support the

ANNEX I - 14
sustainability and enhance the design of each Project Activity of the Water Sector Project

through the Gender Integration Action Plan and final design.

E. IMPLEMENTATION

The implementation framework and the plan for ensuring adequate governance, oversight,

management, monitoring and evaluation and fiscal accountability for the use of MCC Funding is

summarized below. The MCC and the Government shall enter into the PIA, and any other

agreements in furtherance of this Compact, all of which, together with this Compact, shall set out

certain rights, responsibilities, duties and other terms relating to the implementation of the

Program.

1. MCC.

The MCC shall take all appropriate actions to carry out each of its responsibilities in connection

with this Compact and the PIA, including the exercise of its approval rights in connection with

the implementation of this Compact and the Program.

2. Government; MCA-Tanzania; Consultative Committees.

(a) The Government shall form an entity empowered to carry out the Government's

obligations and to implement the Program under this Compact and the PIA ("MCA-Tanzania,"

which, as an institution of the Government, is, for the avoidance of doubt, included in the defined

term "Government"), and shall ensure that MCA-Tanzania takes all appropriate actions to

implement the Program, including the performance of the rights and responsibilities designated

to it by the Government pursuant to this Compact and the PIA.

(i) Governing Board. MCA-Tanzania shall be governed by a governing

board ("Governing Board") that will have final decision-making authority over the

implementation of the Program. The Governing Board shall consist of: seven representatives

from the Government, including at least one representative of Zanzibar, and four representatives

from the private sector and the civil society, at least one of whom shall represent an

environmental non-governmental organization and at least one of whom shall be from Zanzibar.

The private sector and civil society representatives shall be selected as the result of a transparent

selection process approved by the MCC. The Governing Board composition shall be determined

taking to account the need for gender balance among the Governing Board members.

(ii) Secretariat. A secretariat ("Secretariat") shall support the Governing

Board in the implementation of the Program. A Chief Executive Officer will manage the day-today activities of MCA-Tanzania and will be supported by: (1) Deputy Chief Executive Officer

(Tanzania mainland); (2) Deputy Chief Executive Officer (Zanzibar); (3) Director of Finance and

Administration; (4) Director of the Transport Sector Project; (5) Director of the Energy Sector

Project; (6) Director of Water Sector Project; (7) Director of Procurement; (8) Director of

Environmental and Social Impact; (9) Director of Monitoring and Evaluation; (10) General

Counsel; and (11) Internal Auditor; together with such other managers and officers as may be

agreed upon by the Government and the MCC. The senior staff shall be supported by

appropriate administrative personnel.

(b) With prior written consent of the MCC, the Government may designate an entity

to implement some or all of the Government's obligations or to exercise any rights of the

ANNEX I - 15
Government under this Compact or the PIA. The Government's designation to an entity

(whether MCA-Tanzania or otherwise) will not relieve the Government of any designated

obligations and rights, for which the Government will retain full responsibility. For the

avoidance of doubt, upon any such designation, any reference in this Compact, the PIA or any

related agreement to an action or requirement of the Government or to an agreement to which the

Government is a party shall be a reference to the Government and each such designated entity.

(c) The Government shall establish special consultative committees that will continue

the consultative process throughout the Compact Term. These special consultative committees

shall be established satisfactory to the MCC and consistent with the MCC's Guidelines for

Accountable Entities and Implementation Structures delivered by the MCC to the Government or

posted on the MCC Website or otherwise made publicly available. The members of each special

consultative committee shall include non-governmental organizations, the private sector, civil

society, and local and regional governments from the applicable region. The membership of

these special consultative committees shall be determined taking to account the need for gender

balance among the special consultative committee members and shall be agreed to between

MCA-Tanzania and the MCC. Each special consultative committee shall provide advice and

input to the Governing Board and the Secretariat regarding issues related to the implementation

of the Program, shall meet regularly (in a format and on a schedule to be agreed to between the

MCC and the Government) and shall receive regular Program updates from MCA-Tanzania.

These special consultative committees will not have decision-making authority, but will serve as

a mechanism for ongoing consultations between the Government and the public.

(d) MCA-Tanzania may provide MCC Funding to one or more pre-determined

ministries, bureaus or agencies of the Government ("Implementing Entity") based on their

expertise to implement any Project, Project Activity or any of its components under an

agreement that sets forth the responsibilities of such Implementing Entity and any other

appropriate terms and conditions ("Implementing Entity Agreement").

3. Banking Services, Fiscal Management and Procurement.

(a) The Government shall ensure that a bank ("Bank") is appointed, and the

Permitted Accounts are established and banking services provided, in accordance with the terms

of this Compact and the PIA who will provide a broad range of banking services required by

MCA-Tanzania to implement the Program. The Government shall take all appropriate actions to

ensure that the Bank perform these services in accordance with the terms of this Compact, the

PIA and any other agreements to which the Bank is a party. The Government shall set out the

roles and responsibilities of the Bank in one or more agreements with the Bank to be entered into

between MCA-Tanzania and the Bank ("Bank Agreement").

(b) The Government shall ensure that a fiscal agent ("Fiscal Agent") is appointed in

accordance with the terms of this Compact and the PIA who will provide a broad range of

financial management services required by MCA-Tanzania to implement the Program. The

Government shall take all appropriate actions to ensure that the Fiscal Agent perform these

services in accordance with the terms of this Compact, the PIA and any other agreements to

which the Fiscal Agent is a party and in accordance with internationally accepted standards of

accounting and financial management. The Government shall set out the roles and

responsibilities of the Fiscal Agent in one or more agreements with the Fiscal Agent to be

entered into between MCA-Tanzania and the Fiscal Agent ("Fiscal Agent Agreement").

ANNEX I - 16
(c) The Government shall ensure that one or more procurement agents (each, a

"Procurement Agent') are appointed in accordance with the terms of this Compact and the PIA

who will provide specified procurement activities required by MCA-Tanzania to implement the

Program. The Government shall take all appropriate actions to ensure that each Procurement

Agent perform these services in accordance with the terms of this Compact, the PIA and any

other agreements to which the Procurement Agent is a party and in accordance with the MCC

Program Procurement Guidelines. The Government shall set out the roles and responsibilities of

each Procurement Agent in one or more agreements with such Procurement Agent to be entered

into between MCA-Tanzania and the Procurement Agent ("Procurement Agent Agreement').

ANNEX I - 17
ANNEX II

PROGRAM BUDGET

1. General.

The Multi-Year Financial Plan Summary below sets forth the estimated annual contribution of

MCC Funding for Program administration, Program monitoring and evaluation, and

implementing each Project. The Government's contribution of resources will consist of "inkind" and other contributions or amounts required effectively to satisfy the requirements of

Section 2.5(a) of this Compact. In accordance with the PIA, the Government will develop and

adopt on a quarterly basis a detailed financial plan (as approved by the MCC) setting forth

annual and quarterly funding requirements for the Program (including administrative costs) and

for each project, projected both on a commitment and cash requirement basis.

2. Modifications.

To preserve administrative flexibility, the Parties may by written agreement (or as otherwise

provided in the PIA), without amending this Compact, change the designations and allocations of

funds among the Projects, the Project Activities, or any activity under Program administration or

monitoring and evaluation, or between a Project identified as of entry into force of the Compact

and a new project; provided, however, that any such change (a) is consistent with the Project

Objectives and the PIA, (b) does not materially adversely affect the applicable Project or any

activity under Program administration or monitoring and evaluation, (c) does not cause the

amount of MCC Funding to exceed the aggregate amount specified in Section 2.1 of this

Compact, and (d) does not cause the Government's obligations or responsibilities or overall

contribution of resources to be less than specified in Section 2.5(a) of this Compact.
MULTI-YEAR FINANCIAL PLAN SUMMARY'

(US$ '000)

Project Year 1 + CIF Year 2 Year 3 Year 4 Year 5 Total

1. Transport

A. Mainland Trunk Roads Activity

B. Zanzibar Rural Roads Activity

C. Road Maintenance Activity

D. Mafia Island Airport Activity

Sub-Total 21,552 84,406 147,131 82,606 37,081 372,776

2. Energy

A. Zanzibar Interconnector Activity

B. Malagarasi Hydropower & Kigoma

Distribution Activity

C. Distribution Systems Rehabilitation and

Extension Activity

Sub-Total 16,646 45,501 53,435 59,083 31,806 206,471

3. Water

A. Lower Ruvu Plant Expansion Activity

B. Non-Revenue Water Activity

C. Morogoro Water Supply Activity

Sub-Total 5,845 16,959 17,786 16,838 8,908 66,336

4. Monitoring and Evaluation

Monitoring and Evaluation

Sub-Total 2,500 1,000 1,000 1,000 4,500 10,000

5. Program Administration and Audits

A. Program Admin. (MCA-Tanzania)

B. Fiscal Agent Support

C. Procurement Agent Services

D. Audit

E. Capacity Building and Technical

Assistance

Sub-Total 11,202 7,615 7,900 7,868 7,968 42,553

Total Estimated MCC Contribution 57,745 155,481 227,252 167,395 90,263 698,136

under the relevant Projects include, as appropriate: engineering and environmental

assistance; coordination; contingencies; project management; and, construction

ANNEX II- 2

' Costs indicated in the table above for all Project Activities

studies; implementation of EMPs and RAPs; technical

supervision.
Transport Sector Project

Objectives:

• Increased cash crop

revenue

• Increased aggregate

visitor spending

1

Road Upgrading

Outcomes:

•Reduced

transportation costs

and travel time

increased traffic

volume

Mafia Island Airport

Upgrading

Outcomes:

•Increased air

passenger traffic

ANNEX III

SUMMARY OF MONITORING AND EVALUATION PLAN

This Annex III to this Compact (the "M&E Annex") generally describes the components of the

monitoring and evaluation plan (the "M&E Plan") for the Program. Each capitalized term in

this Annex III shall have the same meaning given such term elsewhere in this Compact.

1. Overview.

The MCC and the Government (or a mutually acceptable Government affiliate or permitted

designee) shall formulate, agree to and the Government shall implement, or cause to be

implemented, an M&E Plan that specifies (a) how progress toward the Compact Goal and the

Project Objectives will be monitored, ("Monitoring Component"), (b) process and timeline for

the monitoring of planned, ongoing, or completed Project Activities to determine their efficiency

and effectiveness, and (c) a methodology for assessment and rigorous evaluation of the outcomes

and impact of the program ("Evaluation Component"). Information regarding the Program's

performance, including the M&E Plan, and any amendments or modifications thereto, as well as

progress and other reports, will be made publicly available on the MCA-Tanzania Website and

elsewhere.

2. Program Logic.

The Tanzania program monitoring and evaluation plan shall be built on the program logic model

below, which is a graphical representation of the program showing the sequence of results and

the causal links between outcomes, objectives, and ultimately the Compact Goal.

MCA-Tanzania Compact Goal:

Economic Growth and Poverty Reduction through Investments in

Transport, Energy, and Water Infrastructure

Energy Sector Project

Objective:

• Increased value added

to businesses

Energy Sector Outcomes:

•Increased quantity of

electricity sold

•Increased number of

power customers

•Better quality and more

reliable power

Water Sector Project

Objectives:

increased investment in

human and physical capital

•Reduced prevalence of

water-related diseases

Water Sector Outcomes:

•Increased number of

households and businesses

using improved water

sources

increased per capita water

consumption

The Program's focus on infrastructure is an essential part of addressing Tanzania's development

challenges in accordance with the MKUKUTA/MKUZA. The Transport Sector Project is based

on the logic that improvements in the road network and airports can reduce transport costs to

regional, national and international markets, thereby catalyzing growth in sectors that rely on
good transportation links, such as agriculture and tourism. The Energy Sector Project will

provide reliable electricity to households and businesses, allowing for an increase in the scale

and scope of productive activities and increased value added for businesses in project areas. The

logic behind the Water Sector Project is that by increasing the supply of potable water for

households, mortality and morbidity from water-related diseases will decrease, leading to

increased investment human and physical capital. In addition, increasing the reliability of

potable water should lead to increased investments in productive assets by business.

3. Monitoring Component.

(a) Indicators. The M&E Plan shall measure the results of the Program using

quantitative, objective and reliable data ("Indicators"). Each Indicator will have one or more

expected results that specify the expected value and the expected time by which that result will

be achieved ("Target"). The M&E Plan will measure and report four types of Indicators. First,

the Compact Goal Indicators (each, a "Goal Indicator") will measure the impact of the Program

on the incomes of Tanzanians who participate or are covered by the Program (collectively,

"Beneficiaries"). Second, Objective Indicators (each, an "Objective Indicator") will measure

the final results of the Projects in order to monitor their success in meeting the Project

Objectives. Third, Outcome Indicators (each, an "Outcome Indicator") will measure the

intermediate results of goods and services delivered under each Project in order to provide an

early measure of the likely impact of the Projects on the Project Objectives. Fourth, Project

Activity Indicators (each, an "Activity Indicator")(each of Goal Indicator, Objective Indicator,

Outcome Indicator and Activity Indicator, an "Indicator") will measure the delivery of key

goods and services in order to monitor the pace of Project Activity execution. For each Outcome

Indicator, Objective Indicator, and Goal Indicator, the M&E Plan will define a strategy for

obtaining and verifying the value of such Indicator prior to undertaking any activity that affects

the value of such Indicator (such value, a "Baseline"). All Indicators will be disaggregated by

gender, income level and age, to the extent practicable. Subject to prior written approval from

the MCC, MCA-Tanzania may add Indicators or refine the Targets of existing Indicators.

(i) Goal Indicators. The M&E Plan shall contain the Goal Indicators listed in

the table below, with their definitions, unit of measurement, baseline, and Year 5 with and

without Projects.

ANNEX III - 2







5. Other Components of the M&E Plan.

In addition to the Monitoring and Evaluation Components, the M&E Plan shall include the

following components for the Program, Projects and Project Activities, including, where

appropriate, roles and responsibilities of the relevant parties and Providers:

(a) Coordination of data collection. Efforts to synchronize data collection with

relevant national initiatives including the WSDP performance monitoring framework,

MKUKUTA monitoring plan and the MKUZA monitoring plan.

(b) M&E Budget. A detailed cost estimate for all components of the M&E Plan.

(c) Assumptions and Risks. Any assumptions and risks external to the Program that

underlie the accomplishment of the Project Objectives and Project Activity Outcomes; provided,

however, that such assumptions and risks shall not excuse performance of the Parties, unless

otherwise expressly agreed to in writing by the Parties.

ANNEX III - 10