Federal Register / Vol. 75, No. 191 / Monday, October 4, 2010 / Notices 61197 

IX. Other Information 

OMB Information Collection No. 1225– 

0086 

OMB Information Collection No. 1225– 

0086, Expires November 30, 2012 

According to the Paperwork 

Reduction Act of 1995, no persons are 

required to respond to a collection of 

information unless such collection 

displays a valid OMB control number. 

Public reporting burden for this 

collection of information is estimated to 

average 20 hours per response, 

including time for reviewing 

instructions, searching existing data 

sources, gathering and maintaining the 

data needed, and completing and 

reviewing the collection of information. 

Send comments regarding the burden 

estimated or any other aspect of this 

collection of information, including 

suggestions for reducing this burden, to 

the U.S. Department of Labor, to the 

attention of: Departmental Clearance 

Officer, 200 Constitution Avenue, NW., 

Room N–1310, Washington, DC 20210. 

Comments may also be e-mailed to 

DOL_PRA_PUBLIC@dol.gov. Please do 

not return the completed application to 

this address. Send it to the sponsoring 

agency as specified in this solicitation. 

This information is being collected for 

the purpose of awarding a grant. The 

information collected through this 

‘‘Solicitation for Grant Applications’’ 

will be used by DOL to ensure that 

grants are awarded to the applicant best 

suited to perform the functions of the 

grant. Submission of this information is 

required in order for the applicant to be 

considered for award of this grant. 

Unless otherwise specifically noted in 

this announcement, information 

submitted in the respondent’s 

application is not considered to be 

confidential. 

Signed at Washington, DC, this 28th day of 

September 2010. 

Donna Kelly, 

Grant Officer, Employment and Training 

Administration. 

[FR Doc. 2010–24825 Filed 10–1–10; 8:45 am] 

BILLING CODE 4510–FT–P 

MILLENNIUM CHALLENGE 

CORPORATION 

[MCC FR 10–11] 

Notice of Entering Into a Compact With 

the Republic of the Philippines 

AGENCY: Millennium Challenge 

Corporation. 

ACTION: Notice. 

SUMMARY: In accordance with Section 

610(b)(2) of the Millennium Challenge 

Act of 2003 (Pub. L. 108–199, Division 

D), the Millennium Challenge 

Corporation (MCC) is publishing a 

summary and the complete text of the 

Millennium Challenge Compact 

between the United States of America, 

acting through the Millennium 

Challenge Corporation, and the 

Republic of the Philippines. 

Representatives of the United States 

Government and the Republic of the 

Philippines executed the Compact 

documents on September 23, 2010. 

Dated: September 29, 2010. 

Melvin F. Williams, Jr., 

VP/General Counsel and Corporate Secretary, 

Millennium Challenge Corporation. 

Summary of Millennium Challenge 

Compact With the Republic of the 

Philippines 

The five-year Millennium Challenge 

Compact with the Republic of the 

Philippines (‘‘Compact’’) will provide up 

to $433,910,000 million to reduce 

poverty and accelerate economic 

growth. The Compact is intended to 

support: (i) Reforms and investments to 

modernize the Bureau of Internal 

Revenue to increase fiscal space for 

public investment and to reduce 

opportunities for corruption in tax 

administration; (ii) expansion and 

improvement of a community-driven 

development project, Kalahi-CIDSS; and 

(iii) rehabilitation of a secondary 

national road in Samar province. 

Revenue Administration Reform Project 

($54.3 million) 

The Revenue Administration Reform 

Project addresses two problems: (i) the 

need to raise tax revenues and (ii) the 

need to reduce tax evasion and revenue 

agent-related corruption. A key 

constraint to economic growth in the 

Philippines is the lack of fiscal space for 

growth-enhancing investments in public 

goods such as infrastructure and social 

services (e.g., education and health). 

This project will focus on the Bureau of 

Internal Revenue within the Department 

of Finance to increase the efficiency and 

sustainability of revenue collection 

through a redesign and computerization 

of business processes, thereby helping 

to relieve some pressure on the 

Government of the Republic of the 

Philippines’ (‘‘GRP’s’’) fiscal position. 

This project will narrow the gap 

between potential and actual collections 

by reducing the discretion of individual 

revenue (i.e., tax and customs) 

collection officers, and help improve the 

predictability and impartiality with 

which revenue laws and regulations are 

enforced. Some of these activities are 

extensions of the Philippines’ threshold 

program activities that concluded in 

May 2009. The project is expected to 

reach the entire Philippine population 

and has an economic rate of return of 40 

percent. 

Kalahi-CIDSS Community Development 

Project ($120.0 million) 

The Kalahi-CIDSS Project will 

improve welfare in rural areas by 

targeting communities where poverty 

incidence exceeds the national average 

for small-scale, community-driven 

development projects. The project does 

this through the direct provision of 

infrastructure and services associated 

with community-selected and managed 

sub-projects, strengthened community 

participation in development and 

governance activities at the village and 

municipal level, and improved 

responsiveness of local government to 

community needs. The project will 

build on and support the application of 

the participatory planning, 

implementation, and evaluation 

methodology developed by GRP’s 

Department of Social Welfare and 

Development (DSWD) in collaboration 

with the World Bank. 

Grants for the community sub-projects 

are provided directly to the local 

communities, which are responsible for 

sub-project selection, the procurement 

of goods and services for their subproject, and, in most cases, the 

operations and maintenance of the 

physical assets. DSWD will implement 

the project, overseen by a National 

Steering Committee that includes 

representatives from government 

departments and NGOs, and in 

collaboration with local governments. 

Typical sub-projects will include 

small-scale transportation infrastructure 

such as village access roads and bridges, 

school buildings, health clinics, 

drinking water systems, pre-and postharvest facilities, and other economic 

assets. The project is expected to benefit 

over five million beneficiaries over the 

next 20 years and has an estimated 

economic rate of return of 13 percent. 

Secondary National Roads Development 

Project ($214.4 million) 

The Secondary National Roads 

Development Project is designed to 

reduce transportation costs through the 

rehabilitation of an existing 222 

kilometer road segment. By bringing 

about savings in vehicle operating cost 

and time for both passengers and goods, 

and by reducing road maintenance 

costs, the investment will facilitate 

increased commerce in and between the 

provinces of Samar and Eastern Samar, 


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and ultimately contribute to the 

Compact’s objective of increasing 

incomes. 

This project will incorporate 

enhanced safety measures in the final 

road designs, including: (i) Paved 

shoulders intended to improve 

conditions for vehicles and provide 

space for pedestrians; (ii) construction 

of sidewalks and curbs where 

pedestrian activity is higher, such as 

near schools and other public facilities; 

(iii) improved gateway treatments to 

indicate where lower speeds are 

required, typically in more developed 

communities and urban areas; and (iv) 

increased use of road narrowing, 

median islands, and traffic humps to 

slow traffic speeds. The project is 

expected to reach 290,000 beneficiaries 

and has an economic rate of return of 14 

percent. 

Administration 

The Compact also includes program 

management and oversight costs 

estimated at $36.91 million over a fiveyear time frame, including the costs of 

administration, management, auditing, 

and fiscal and procurement agent 

services. In addition, the cost of 

monitoring and evaluation of the 

Compact is budgeted at approximately 

$8.26 million. 

Millennium Challenge Compact 

Between the United States of America 

Acting Through the Millennium 

Challenge Corporation and the Republic 

of the Philippines 

Table of Contents 

Article 1. Goal and Objectives 

Section 1.1 Compact Goal 

Section 1.2 Program Objective 

Section 1.3 Project Objectives 

Article 2. Funding and Resources 

Section 2.1 Program Funding 

Section 2.2 Compact Implementation 

Funding 

Section 2.3 MCC Funding 

Section 2.4 Disbursement 

Section 2.5 Interest 

Section 2.6 Government Resources; 

Budget 

Section 2.7 Limitations of the Use of MCC 

Funding 

Section 2.8 Taxes and Contributions 

Article 3. Implementation 

Section 3.1 Program Implementation 

Agreement 

Section 3.2 Government Responsibilities 

Section 3.3 Policy Performance 

Section 3.4 Government Assurances 

Section 3.5 Implementation Letters 

Section 3.6 Procurement 

Section 3.7 Records; Accounting; Covered 

Providers; Access 

Section 3.8 Audits; Reviews 

Article 4. Communications 

Section 4.1 Communications 

Section 4.2 Representatives 

Article 5. Termination; Suspension; Refunds 

Section 5.1 Termination; Suspension 

Section 5.2 Refunds; Violation 

Section 5.3 Survival 

Article 6. Compact Annexes; Amendments; 

Governing Law 

Section 6.1 Annexes 

Section 6.2 Amendments 

Section 6.3 Inconsistencies 

Section 6.4 Governing Law 

Section 6.5 Additional Instruments 

Section 6.6 References to MCC Web site 

Section 6.7 References to Laws, 

Regulations, Policies, and Guidelines 

Section 6.8 MCC Status 

Section 6.9 Counterparts; Electronic 

Delivery 

Article 7. Entry Into Force 

Section 7.1 Conditions Precedent to Entry 

Into Force 

Section 7.2 Date of Entry Into Force 

Section 7.3 Compact Term 

Section 7.4 Provisional Application 

Article 8. Additional Government Covenants 

Section 8.1 Project Covenants 

Annex I: Program Description 

Annex II: Multi-Year Financial Plan 

Summary 

Annex III: Description of the Monitoring and 

Evaluation Plan 

Annex IV: Conditions to Disbursement of 

Compact Implementation Funding 

Annex V: Definitions 

Millennium Challenge Compact 

Preamble 

This Millennium Challenge Compact 

(this ‘‘Compact’’) is between the United 

States of America, acting through the 

Millennium Challenge Corporation, a 

United States government corporation 

(‘‘MCC’’), and the Republic of the 

Philippines (‘‘the Philippines’’), acting 

through its government (the 

‘‘Government’’), represented by its 

Department of Finance. 

MCC and the Government are 

individually referred to in this Compact 

as a ‘‘Party’’ and together, as the 

‘‘Parties.’’ Capitalized terms used in this 

Compact will have the meanings 

specified in Annex V hereto. 

Recalling that the Government 

consulted with the private sector and 

civil society of the Philippines to 

determine the priorities for the use of 

Millennium Challenge Account 

assistance and developed and submitted 

to MCC a proposal for such assistance 

to achieve lasting economic growth and 

poverty reduction; and 

Recognizing that MCC wishes to help 

the Philippines implement a program to 

achieve the goal and objectives 

described herein (the ‘‘Program’’). 

The Parties agree as follows: 

Article 1. Goal and Objectives 

Section 1.1 Compact Goal 

The goal of this Compact is to reduce 

poverty through economic growth in the 

Philippines (the ‘‘Compact Goal’’). 

Section 1.2 Program Objective 

The objective of the Program is to: (a) 

Increase the incomes of Filipinos 

through the benefits of communitydriven sub-projects; (b) obtain time 

savings and lower transportation costs 

for road users in Program areas; and (c) 

increase investment and government 

expenditure due to an increase in tax 

revenue and a reduction in corruption 

(as further described in Annex I, the 

‘‘Program Objective’’). 

Section 1.3 Project Objectives 

The objectives of the Projects (as 

further described in Annex I) (each a 

‘‘Project Objective’’ and collectively, the 

‘‘Project Objectives’’) are as follows: 

(a) The objectives of the KALAHI– 

CIDSS Project (as defined in Annex I) 

are to: (i) Improve the responsiveness of 

local governments to community needs; 

(ii) encourage communities to engage in 

development activities; and (iii) deliver 

benefits to barangay residents through 

individual sub-projects. 

(b) The objectives of the Secondary 

National Roads Development Project (as 

defined in Annex I) are to: (i) save time; 

and (ii) lower vehicle operating costs for 

those Filipinos living near the roads. 

(c) The objectives of the Revenue 

Administration Reform Project (as 

defined in Annex I) are to: (i) increase 

tax revenues over time; and (ii) support 

the Department of Finance’s initiatives 

to detect and deter corruption within its 

revenue agencies. 

Article 2. Funding and Resources 

Section 2.1 Program Funding 

Upon entry into force of this Compact, 

MCC will grant to the Government, 

under the terms of this Compact, an 

amount not to exceed Four Hundred 

Eight Million Eight Hundred Fifty 

Thousand United States Dollars (U.S. 

$408,850,000) to support the Program 

(‘‘Program Funding’’). The allocation of 

Program Funding is generally described 

in Annex II to this Compact. 

Section 2.2 Compact Implementation 

Funding 

(a) Upon signature of this Compact, 

MCC hereby grants to the Government, 

under the terms of this Compact, in 

addition to the Program Funding 

described in Section 2.1, an amount not 

to exceed Twenty-Five Million Sixty 

Thousand United States Dollars (U.S. 

$25,060,000) (‘‘Compact Implementation 

Funding’’) under Section 609(g) of the 

Millennium Challenge Act of 2003, as 

amended (the ‘‘MCA Act’’), for use by the 

Government as agreed by the Parties, 

which may include use for the following 

purposes: 


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(i) Project management activities for 

the KALAHI–CIDSS Project; 

(ii) Procurement and establishment of 

a project management company for the 

Secondary National Roads Development 

Project; and 

(iii) Technical assistance for advisory 

services for the Revenue Administration 

Reform Project. 

The allocation of Compact 

Implementation Funding is generally 

described in Annex II to this Compact. 

(b) In accordance with Section 7.4 of 

this Compact, this Section 2.2 and other 

provisions of this Compact necessary to 

make use of Compact Implementation 

Funding for the purposes set forth 

herein, will be effective, for purposes of 

Compact Implementation Funding only, 

as of the date this Compact is signed by 

MCC and the Government. 

(c) Each Disbursement of Compact 

Implementation Funding is subject to 

satisfaction of the conditions to such 

Disbursement as set forth in Annex IV. 

(d) If, after the first anniversary of this 

Compact entering into force, MCC 

determines that the full amount of 

Compact Implementation Funding 

under Section 2.2(a) of this Compact 

exceeds the amount which reasonably 

can be utilized for the purposes and 

uses set forth in Section 2.2(a) of this 

Compact, MCC, by written notice to the 

Government, may withdraw the excess 

amount, thereby reducing the amount of 

the Compact Implementation Funding 

as set forth in Section 2.2(a) (such 

excess, the ‘‘Excess CIF Amount’’). In 

such event, the amount of Compact 

Implementation Funding granted to the 

Government under Section 2.2(a) will be 

reduced by the Excess CIF Amount, and 

MCC will have no further obligations 

with respect to such Excess CIF 

Amount. 

(e) MCC, at its option by written 

notice to the Government, may elect to 

grant to the Government an amount 

equal to all or a portion of such Excess 

CIF Amount as an increase in the 

Program Funding, and such additional 

Program Funding will be subject to the 

terms and conditions of this Compact 

and any relevant supplemental 

agreement applicable to Program 

Funding. 

Section 2.3 MCC Funding 

Program Funding and Compact 

Implementation Funding are 

collectively referred to in this Compact 

as ‘‘MCC Funding.’’ 

Section 2.4 Disbursement 

In accordance with this Compact and 

the Program Implementation 

Agreement, MCC will disburse MCC 

Funding for expenditures incurred in 

furtherance of the Program (each 

instance, a ‘‘Disbursement’’). Subject to 

the satisfaction of all applicable 

conditions, the proceeds of such 

Disbursements will be made available to 

the Government, at MCC’s sole election, 

by (a) deposit to one or more bank 

accounts established by the Government 

through MCA-Philippines and 

acceptable to MCC (each, a ‘‘Permitted 

Account’’) or (b) direct payment to the 

relevant provider of goods, works or 

services for the implementation of the 

Program. MCC Funding may be 

expended only to fund Program 

expenditures as provided in this 

Compact and the Program 

Implementation Agreement. 

Section 2.5 Interest 

Except as otherwise agreed by MCC, 

the Government will transfer to MCC 

any interest or other earnings that 

accrue on MCC Funding (whether by 

directing such payments to a bank 

account outside the Philippines that 

MCC may from time to time indicate or 

as otherwise directed by MCC). 

Section 2.6 Government Resources; 

Budget 

(a) The Government will provide all 

funds and other resources, and will take 

all actions, that are necessary to carry 

out the Government’s responsibilities 

and obligations under this Compact. 

(b) The Government will provide 

suitable and adequate office space for 

MCA-Philippines, the Fiscal Agent, the 

Procurement Agent, and the MCC 

resident country mission. 

(c) The Government will ensure that 

all MCC Funding it receives or is 

projected to receive in each of its fiscal 

years is fully accounted for in its annual 

budget on a multi-year basis. 

(d) The Government will not reduce 

the normal and expected resources that 

it would otherwise receive or budget 

from sources other than MCC for the 

activities contemplated under this 

Compact and the Program. 

(e) Unless the Government discloses 

otherwise to MCC in writing, MCC 

Funding will be in addition to the 

resources that the Government would 

otherwise receive or budget for the 

activities contemplated under this 

Compact and the Program. 

(f) Without limitation of its 

obligations under Section 2.6(a) above, 

the Government shall: (i) Contribute 

funding to MCA-Philippines as 

described in Section 16 of the 

Establishment Decree and in 

compliance with Section 2.13 of the 

Program Implementation Agreement; 

and (ii) 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 2.7 Limitations on the Use of 

MCC Funding 

The Government will ensure that 

MCC Funding (or any refunds or 

reimbursements of MCC Funding paid 

by the Government in accordance with 

this Compact that MCC permits to be 

used in connection with the Program) 

will not be used for any purpose that 

would violate United States law or 

policy, as specified in this Compact or 

as further notified to the Government in 

writing or by posting from time to time 

on the MCC Web site at www.mcc.gov 

(the ‘‘MCC Web site’’), including, but not 

limited to, the following purposes: 

(a) For assistance to, or training of, the 

military, police, militia, national guard 

or other quasi-military organization or 

unit; 

(b) For any activity that is likely to 

cause a substantial loss of United States 

jobs or a substantial displacement of 

United States production; 

(c) To undertake, fund or otherwise 

support any activity that is likely to 

cause a significant environmental, 

health, or safety hazard, as further 

described in MCC’s environmental and 

social guidelines posted from time to 

time on the MCC Web site or otherwise 

made available to the Government by 

MCC (the ‘‘MCC Environmental 

Guidelines’’); or 

(d) To pay for the performance of 

abortions as a method of family 

planning or to motivate or coerce any 

person to practice abortions, to pay for 

the performance of involuntary 

sterilizations as a method of family 

planning or to coerce or provide any 

financial incentive to any person to 

undergo sterilizations or to pay for any 

biomedical research which relates, in 

whole or in part, to methods of, or the 

performance of, abortions or involuntary 

sterilization as a means of family 

planning. 

Section 2.8 Taxes and Contributions 

The Government will ensure that no 

MCC Funding will be used for the 

payment of any existing or future taxes, 

customs duties, social security and 

other employment-related contributions, 

or other similar charges of the 

Government or any other governmental 

entity (national or sub-national, 

including of provinces, cities, 

municipalities, barangays, and other 

local governmental entities) in the 

Philippines (‘‘Taxes and 

Contributions’’), in accordance with 


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Section 2.4 of the Program 

Implementation Agreement. 

Article 3. Implementation 

Section 3.1 Program Implementation 

Agreement 

Prior to entry into force of this 

Compact, the Government and MCC will 

enter into an agreement relating to, 

among other matters, implementation 

arrangements, fiscal accountability, and 

the disbursement and use of MCC 

Funding (the ‘‘Program Implementation 

Agreement’’ or ‘‘PIA’’). The Government 

will implement the Program in 

accordance with the Compact and the 

PIA. 

Section 3.2 Government 

Responsibilities 

(a) The Government has principal 

responsibility for overseeing and 

managing the implementation of the 

Program. 

(b) The Government hereby designates 

MCA-Philippines, an entity established 

through the issuance of Executive Order 

No. 849 of the Government (as 

amended, the ‘‘Establishment Decree’’), 

as the accountable entity to implement 

the Program and to exercise and perform 

the Government’s rights and 

responsibilities with respect to the 

oversight, management, and 

implementation of the Program, 

including, without limitation, managing 

the implementation of Projects and their 

Activities, allocating resources, and 

managing procurements. Such entity 

will be referred to herein as Millennium 

Challenge Account-Philippines (‘‘MCAPhilippines’’), and has the authority to 

bind the Government with regard to all 

Program Activities. The Establishment 

Decree will remain in form and 

substance satisfactory to MCC. For the 

avoidance of doubt, the designation of 

MCA-Philippines as set forth in this 

Section 3.2(b) will not relieve the 

Government of any of its obligations or 

responsibilities as set forth hereunder, 

under any related agreement (including, 

upon execution thereof, the PIA), or 

under the Program Guidelines, for 

which the Government remains fully 

responsible. MCC hereby acknowledges 

and consents to the designation in this 

Section 3.2(b). 

(c) The Government will ensure that 

no law or regulation in the Philippines 

now or hereinafter in effect makes or 

will make unlawful or otherwise 

prevent or hinder the performance of 

any of the Government’s obligations 

under this Compact, the PIA, or any 

other related agreement or any 

transaction contemplated hereby or 

thereby. 

(d) The Government will ensure that 

any assets or services funded in whole 

or in part (directly or indirectly) by 

MCC Funding are used solely in 

furtherance of this Compact and the 

Program unless otherwise agreed by 

MCC in writing. 

(e) The Government will take all 

necessary or appropriate steps to 

achieve the Program Objective and the 

Project Objectives during the Compact 

Term. 

(f) The Government will fully comply 

with the Program Guidelines, as 

applicable, in its implementation of the 

Program. 

Section 3.3 Policy Performance 

In addition to undertaking the specific 

policy, legal, and regulatory reform 

commitments identified in Annex I (if 

any), the Government will seek to 

maintain and to improve its level of 

performance under the policy criteria 

identified in Section 607 of the MCA 

Act, and the selection criteria and 

methodology used by MCC. 

Section 3.4 Government Assurances 

The Government assures MCC that, as 

of the date this Compact is signed by the 

Government, the information provided 

to MCC by or on behalf of the 

Government in the course of reaching 

agreement with MCC on this Compact is 

true, correct and complete in all 

material respects. 

Section 3.5 Implementation Letters 

From time to time, MCC may provide 

guidance to the Government in writing 

on any matters relating to this Compact, 

MCC Funding, or implementation of the 

Program (each, an ‘‘Implementation 

Letter’’). The Government will apply 

such guidance in implementing the 

Program. Without limiting the foregoing, 

either Party may, through its Principal 

Representative or any Additional 

Representative, as the case may be, 

initiate discussions that may result in a 

jointly agreed-upon Implementation 

Letter to confirm and record their 

mutual understanding on aspects 

related to the implementation of this 

Compact, the PIA, or other related 

agreements. 

Section 3.6 Procurement 

The Government will ensure that the 

procurement of all goods, works, and 

services by the Government, or any 

applicable provider providing goods, 

works, and services, to implement the 

Program will be consistent with the 

program procurement guidelines posted 

from time to time on the MCC Web site 

(the ‘‘MCC Program Procurement 

Guidelines’’). The MCC Program 

Procurement Guidelines include, among 

others, the following requirements: 

(a) Open, fair, and competitive 

procedures must be used in a 

transparent manner to solicit, award and 

administer contracts and to procure 

goods, works, and services; 

(b) Solicitations for goods, works, and 

services must be based upon a clear and 

accurate description of the goods, 

works, and services to be acquired; 

(c) Contracts must be awarded only to 

qualified contractors that have the 

capability and willingness to perform 

the contracts in accordance with their 

terms on a cost effective and timely 

basis; 

(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; and 

(e) Such procurement of goods, works, 

and services by the Government, or any 

applicable provider providing goods, 

works, and services, to implement the 

Program will not be subject to any 

domestic preference, local content, or 

local labor requirements. 

Section 3.7 Records; Accounting; 

Covered Providers; Access 

(a) Government Books and Records. 

The Government will maintain, and will 

use its best efforts to ensure that all 

Covered Providers maintain, accounting 

books, records, documents, and other 

evidence relating to the Program 

adequate to show, to MCC’s satisfaction, 

the use of all MCC Funding (‘‘Compact 

Records’’). In addition, the Government 

will furnish or cause to be furnished to 

MCC, upon its request, all such 

Compact Records. 

(b) Accounting. The Government will 

maintain, and will use its best efforts to 

ensure that all Covered Providers 

maintain, Compact Records in 

accordance with generally accepted 

accounting principles prevailing in the 

United States, or at the Government’s 

option and with MCC’s prior written 

approval, other accounting principles, 

such as those (i) prescribed by the 

International Accounting Standards 

Board, or (ii) then prevailing in the 

Philippines. Compact Records must be 

maintained for at least five (5) years 

after the end of the Compact Term or for 

such longer period, if any, required to 

resolve any litigation, claims or audit 

findings or any statutory requirements. 

(c) Providers and Covered Providers. 

Unless the Parties agree otherwise in 

writing, a ‘‘Provider’’ is (i) any entity of 

the Government that receives or uses 

MCC Funding or any other Program 

Asset in carrying out activities in 


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furtherance of this Compact, or (ii) any 

third party that receives at least Fifty 

Thousand United Stated Dollars 

(US$50,000) in the aggregate of MCC 

Funding (other than as salary or 

compensation as an employee of an 

entity of the Government) during the 

Compact Term. A ‘‘Covered Provider’’ is 

(1) a non-United States Provider that 

receives (other than pursuant to a direct 

contract or agreement with MCC) Three 

Hundred Thousand United States 

Dollars (US$300,000) or more of MCC 

Funding in any Government fiscal year 

or any other non-United States person 

or entity that receives, directly or 

indirectly, Three Hundred Thousand 

United States Dollars (US$300,000) or 

more of MCC Funding from any 

Provider in such fiscal year, or (2) any 

United States Provider that receives 

(other than pursuant to a direct contract 

or agreement with MCC) Five Hundred 

Thousand United States Dollars 

(US$500,000) or more of MCC Funding 

in any Government fiscal year or any 

other United States person or entity that 

receives, directly or indirectly, Five 

Hundred Thousand United States 

Dollars (US$500,000) or more of MCC 

Funding from any Provider in such 

fiscal year. 

(d) Access. Upon MCC’s request, the 

Government, at all reasonable times, 

will permit, or cause to be permitted, 

authorized representatives of MCC, an 

authorized Inspector General, the 

United States Government 

Accountability Office, any auditor 

responsible for an audit contemplated 

herein or otherwise conducted in 

furtherance of this Compact, and any 

agents or representatives engaged by 

MCC or the Government to conduct any 

assessment, review, or evaluation of the 

Program, the opportunity to audit, 

review, evaluate, or inspect facilities 

and activities funded in whole or in part 

by MCC Funding. 

Section 3.8 Audits; Reviews 

(a) Government Audits. Except as the 

Parties may otherwise agree in writing, 

the Government will, on at least a semiannual basis, conduct, or cause to be 

conducted, financial audits of all 

Disbursements of MCC Funding 

covering the period from signing of this 

Compact until the earlier of the 

following December 31 or June 30 and 

covering each six-month period 

thereafter ending December 31 and June 

30, through the end of the Compact 

Term. In addition, upon MCC’s request, 

the Government will ensure that such 

audits are conducted by an independent 

auditor approved by MCC and named 

on the list of local auditors approved by 

the Inspector General of MCC (the 

‘‘Inspector General’’) or a United Statesbased certified public accounting firm 

selected in accordance with the 

‘‘Guidelines for Financial Audits 

Contracted by MCA’’ (the ‘‘Audit 

Guidelines’’) issued and revised from 

time to time by the Inspector General, 

which are posted on the MCC Web site. 

Audits will be performed in accordance 

with the Audit Guidelines and be 

subject to quality assurance oversight by 

the Inspector General. Each audit must 

be completed and the audit report 

delivered to MCC no later than ninety 

(90) days after the first period to be 

audited and no later than ninety (90) 

days after each June 30 and December 

31 thereafter, or such other period as the 

Parties may otherwise agree in writing. 

(b) Audits of United States Entities. 

The Government will ensure that 

agreements between the Government or 

any Provider, on the one hand, and a 

United States nonprofit organization, on 

the other hand, that are financed with 

MCC Funding state that the United 

States nonprofit organization is subject 

to the applicable audit requirements 

contained in OMB Circular A–133, 

‘‘Audits of States, Local Governments, 

and Non Profit Organizations,’’ issued 

by the United States Government Office 

of Management and Budget. The 

Government will ensure that agreements 

between the Government or any 

Provider, on the one hand, and a United 

States for-profit Covered Provider, on 

the other hand, that are financed with 

MCC Funding state that the United 

States for-profit organization is subject 

to audit by the applicable United States 

Government agency, unless the 

Government and MCC agree otherwise 

in writing. 

(c) Corrective Actions. The 

Government will (i) use its best efforts 

to ensure that Covered Providers take, 

where necessary, appropriate and timely 

corrective actions in response to audits, 

(ii) consider whether the results of a 

Covered Provider’s audit necessitates 

adjustment of the Government’s records, 

and (iii) require each such Covered 

Provider to permit independent auditors 

to have access to its records and 

financial statements as necessary. 

(d) Audit by MCC. MCC will have the 

right to arrange for audits of the 

Government’s use of MCC Funding. 

(e) Cost of Audits, Reviews or 

Evaluations. MCC Funding may be used 

to fund the costs of any audits, reviews, 

or evaluations required under this 

Compact. 

Article 4. Communications 

Section 4.1 Communications 

Any document or communication 

required or submitted by either Party to 

the other under this Compact must be in 

writing and, except as otherwise agreed 

with MCC, in English. For this purpose, 

the address of each Party is set forth 

below. The Government will provide to 

MCC any information that is missing 

from below. 

To MCC: 

Millennium Challenge Corporation, 

Attention: Vice President, Compact 

Operations, (in each case, with a copy 

to the Vice President and General 

Counsel), 875 Fifteenth Street, NW., 

Washington, DC 20005, United States of 

America, Facsimile: (202) 521–3700, 

Telephone: (202) 521–3600, e-mail: 

VPOperations@mcc.gov (Vice President, 

Compact Operations), 

VPGeneralCounsel@mcc.gov (Vice 

President and General Counsel). 

To the Government: 

Attention: Secretary of Finance, (in 

each case, with a copy to the 

Undersecretary for International 

Finance Group), Address: 6/F, DOF 

Building, Department of Finance, 

Bangko Sentral ng Pilipinas Complex, 

Roxas Boulevard, Manila 1004 

Philippines, Facsimile: (632) 523–9495/ 

(632) 523–9216, Telephone: (632) 523– 

9215/(632) 523–9911, e-mail: 

mcccompact@dof.gov.ph. 

To MCA-Philippines: 

Attention: Managing Director, 

Address: Room Nos. 602–604, 6/F EDPC 

Building, Bangko Sentral ng Pilipinas 

Complex, Roxas Boulevard, Manila 1004 

Philippines, Contact details on the 

facsimile number, telephone number, 

and e-mail address will be provided in 

writing to MCC by MCA-Philippines 

Section 4.2 Representatives 

For all purposes of this Compact, the 

Government will be represented by the 

individual holding the position of, or 

acting as, the Secretary of Finance and 

MCC will be represented by the 

individual holding the position of, or 

acting as, Vice President, Compact 

Operations (each of the foregoing, a 

‘‘Principal Representative’’). Each Party, 

by written notice to the other Party, may 

designate one or more additional 

representatives (each, an ‘‘Additional 

Representative’’) for all purposes other 

than signing amendments to this 

Compact. The Government hereby 

irrevocably designates the Managing 

Director of MCA-Philippines as an 

Additional Representative. A Party may 

change its Principal Representative to a 

new representative that holds a position 


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of equal or higher rank upon written 

notice to the other Party. 

Article 5. Termination; Suspension; 

Refunds 

Section 5.1 Termination; Suspension 

(a) Either Party may terminate this 

Compact without cause in whole by 

giving the other Party thirty (30) days 

written notice. MCC may also terminate 

this Compact without cause in part by 

giving the Government thirty (30) days 

written notice. 

(b) MCC may, immediately, upon 

written notice to the Government, 

suspend or terminate this Compact or 

MCC Funding, in whole or in part, and 

any obligation related thereto, if MCC 

determines that any circumstance 

identified by MCC in writing to the 

Government as a basis for suspension or 

termination has occurred, which 

circumstances include, but are not 

limited, to the following: 

(i) The Government fails to comply 

with its obligations under this Compact, 

the PIA, or any other agreement or 

arrangement entered into by the 

Government in connection with this 

Compact or the Program; 

(ii) An event or series of events has 

occurred that MCC determines makes it 

probable that the Program Objective or 

any of the Project Objectives will not be 

achieved during the Compact Term or 

that the Government will not be able to 

perform its obligations under this 

Compact; 

(iii) A use of MCC Funding or 

continued implementation of this 

Compact or the Program violates 

applicable law or United States 

Government policy, whether now or 

hereafter in effect; 

(iv) The Government or any other 

person or entity receiving MCC Funding 

or using assets acquired in whole or in 

part with MCC Funding is engaged in 

activities that are contrary to the 

national security interests of the United 

States; 

(v) An act has been committed or an 

omission or an event has occurred that 

would render the Philippines ineligible 

to receive United States economic 

assistance under Part I of the Foreign 

Assistance Act of 1961, as amended (22 

U.S.C. 2151 et seq.), by reason of the 

application of any provision of the 

Foreign Assistance Act of 1961 or any 

other provision of law; 

(vi) The Philippines is classified as a 

Tier 3 country in the United States 

Department of State’s annual Trafficking 

in Persons Report; 

(vii) The Government has engaged in 

a pattern of actions inconsistent with 

the criteria used to determine the 

eligibility of the Philippines for 

assistance under the MCA Act; or 

(viii) The Government or another 

person or entity receiving MCC Funding 

or using assets acquired in whole or in 

part with MCC Funding is found to have 

been convicted of a narcotics offense or 

to have been engaged in drug trafficking. 

(c) All Disbursements will cease upon 

expiration, suspension, or termination 

of this Compact; provided, however, 

MCC may permit MCC Funding to be 

used, in compliance with this Compact 

and the PIA, to pay for (i) expenditures 

for goods, works, or services that are 

properly incurred under or in 

furtherance of the Program before 

expiration, suspension, or termination 

of this Compact, and (ii) reasonable 

expenditures (including administrative 

expenses) properly incurred in 

connection with the winding up of the 

Program within one hundred twenty 

(120) days after the expiration, 

suspension, or termination of this 

Compact, so long as, with respect to (i) 

and (ii) herein, the request for such 

expenditures is submitted within ninety 

(90) days after such expiration, 

suspension, or termination. 

(d) Subject to Section 5.1(c), upon the 

expiration, suspension, or termination 

of this Compact, (i) any amounts of MCC 

Funding not disbursed by MCC in 

accordance with the Compact and the 

PIA will be automatically released from 

any obligation in connection with this 

Compact, and (ii) any amounts of MCC 

Funding disbursed to the Permitted 

Account by MCC but not expended 

before the expiration, suspension or 

termination of this Compact, plus 

accrued interest thereon will be 

returned to MCC within thirty (30) days 

after the Government receives MCC’s 

request for such return; provided, 

however, that if this Compact is 

suspended or terminated in part, MCC 

may request a refund for only the 

amount of MCC Funding allocated to 

the suspended or terminated portion. 

For the avoidance of doubt, interest will 

accrue from the date of the violation and 

will be calculated at the 10-year U.S. 

Treasury Note rate prevailing as of the 

close of business in Washington, DC as 

of the date of MCC’s request for 

payment. 

(e) MCC may reinstate any suspended 

or terminated MCC Funding under this 

Compact if MCC determines that the 

Government or other relevant person or 

entity has committed to correct each 

condition for which MCC Funding was 

suspended or terminated. 

Section 5.2 Refunds; Violation 

(a) If any MCC Funding, any interest 

or earnings thereon, or any asset 

acquired in whole or in part with MCC 

Funding is used for any purpose in 

violation of the terms of this Compact or 

the PIA, including, but not limited to, 

any violation of the Program Guidelines, 

then MCC may require the Government 

to repay to MCC in United States Dollars 

the value of the misused MCC Funding, 

interest, earnings, or asset, plus interest 

within thirty (30) days after the 

Government’s receipt of MCC’s request 

for repayment. For the avoidance of 

doubt, interest will accrue from the date 

of the violation and will be calculated 

at the 10-year U.S. Treasury Note rate 

prevailing as of the close of business in 

Washington, DC as of the date of MCC’s 

request for payment. The Government 

will not use MCC Funding, proceeds 

thereof or Program Assets to make such 

payment. 

(b) Notwithstanding any other 

provision in this Compact or any other 

agreement to the contrary, MCC’s right 

under this Section 5.2 for a refund will 

continue during the Compact Term and 

for a period of (i) five (5) years 

thereafter, or (ii) one (1) year after MCC 

receives actual knowledge of such 

violation, whichever is later. 

Section 5.3 Survival 

The Government’s responsibilities 

under Sections 2.4, 2.6, 2.7, 2.8, 3.7, 3.8, 

5.1(c), 5.1(d), 5.2, 5.3, 6.2, and 6.4 of 

this Compact will survive the 

expiration, suspension, or termination 

of this Compact. 

Article 6. Compact Annexes; 

Amendments; Governing Law 

Section 6.1 Annexes 

Each annex to this Compact 

constitutes an integral part hereof, and 

references to ‘‘Annex’’ mean an annex to 

this Compact unless otherwise expressly 

stated. 

Section 6.2 Amendments 

(a) The Parties may amend this 

Compact only by a written agreement 

signed by the Principal Representatives. 

(b) Without amending this Compact, 

the Government hereby acknowledges 

and agrees that the Parties may, through 

the Principal Representative or any 

Additional Representative, in writing 

agree to modify any Annex to this 

Compact to (i) suspend, terminate 

(including the termination of a Project 

Objective), or modify any project 

described in Annex I (each, a ‘‘Project’’ 

and collectively, the ‘‘Projects’’) or to 

create a new project, (ii) change the 

allocations of funds from what is set 

forth in Annex II as of the date hereof, 

or (iii) add, delete, or waive any 

condition precedent described in Annex 


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IV, provided that any such modification, 

(1) is consistent in all material respects 

with the Program Objective, (2) does not 

cause the amount of Program Funding to 

exceed the aggregate amount specified 

in Section 2.1 of this Compact (as may 

be modified by operation of Section 

2.2(e) of this Compact), (3) does not 

cause the amount of Compact 

Implementation Funding to exceed the 

aggregate amount specified in Section 

2.2(a) of this Compact, (4) does not 

cause the Government’s responsibilities 

or contribution of resources to be less 

than specified in this Compact, (5) does 

not extend the Compact Term, and (6) 

in the case of a modification to change 

allocations of funds among Projects or 

the creation of a new Project, does not 

materially adversely affect any 

components under the Program 

Administration and Audits or 

Monitoring and Evaluation line items in 

Annex II. 

(c) Any modification of any Annex to 

this Compact signed in accordance with 

Section 6.2(b), or any modification of 

any other provision of this Compact 

pursuant to Section 6.2(a), will be 

binding on the Government without the 

need for further action by the 

Government, any further Congressional 

action, or satisfaction of any additional 

legal requirements of the Philippines. 

Section 6.3 Inconsistencies 

In the event of any conflict or 

inconsistency between: 

(a) Any Annex to this Compact and 

any of Article 1.1 and Articles 2 through 

8, such Article 1.1 and Articles 2 

through 8, as applicable, will prevail; or 

(b) This Compact and any other 

agreement between the Parties regarding 

the Program, this Compact will prevail. 

Section 6.4 Governing Law 

This Compact is an international 

agreement and as such will be governed 

by the principles of international law. 

Section 6.5 Additional Instruments 

Any reference to activities, 

obligations, or rights undertaken or 

existing under or in furtherance of this 

Compact or similar language will 

include activities, obligations, and 

rights undertaken by or existing under 

or in furtherance of any agreement, 

document, or instrument related to this 

Compact and the Program. 

Section 6.6 References to MCC Web 

site 

Any reference in this Compact, the 

PIA, or any other agreement entered into 

in connection with this Compact, to a 

document or information available on, 

or notified by posting on, the MCC Web 

site will be deemed a reference to such 

document or information as updated or 

substituted on the MCC Web site from 

time to time. 

Section 6.7 References to Laws, 

Regulations, Policies, and Guidelines 

Each reference in this Compact, the 

PIA, or any other agreement entered into 

in connection with this Compact, to a 

law, regulation, policy, guideline, or 

similar document (including, but not 

limited to, the Program Guidelines) will 

be construed as a reference to such law, 

regulation, policy, guideline, or similar 

document as it may, from time to time, 

be amended, revised, replaced, or 

extended and will include any law, 

regulation, policy, guideline, or similar 

document issued under or otherwise 

applicable or related to such law, 

regulation, policy, guideline, or similar 

document. 

Section 6.8 MCC Status 

MCC is a United States government 

corporation acting on behalf of the 

United States government in the 

implementation of this Compact. MCC 

and the United States government have 

no liability under this Compact, the 

Program Implementation Agreement, or 

any related agreement, are immune from 

any action or proceeding arising under 

or relating to any of the foregoing 

documents, and the Government hereby 

waives and releases all claims related to 

any such liability. In matters arising 

under or relating to this Compact, the 

Program Implementation Agreement, or 

any related agreement, neither MCC nor 

the United States government will be 

subject to the jurisdiction of the courts 

of the Philippines or of any other 

jurisdiction or of any other body. 

Section 6.9 Counterparts; Electronic 

Delivery 

(a) Counterparts. Signatures to this 

Compact, the Program Implementation 

Agreement, and any amendments to 

these agreements will be signed on the 

same page, except in the case of 

amendment via exchange of letters or 

diplomatic notes. Any other documents 

arising out of this Compact may be 

signed in one or more counterparts. 

Such counterparts when delivered and 

taken together will constitute a single 

document. 

(b) Electronic Delivery. A signature to 

this Compact, the Program 

Implementation Agreement, and any 

amendments to such agreements, will be 

an original signature. With respect to 

any other documents arising out of this 

Compact, a signature delivered by 

facsimile or electronic mail in 

accordance with Section 4.1 of this 

Compact will be deemed an original 

signature and will be binding on the 

Party delivering such signature, and the 

Parties hereby waive any objection to 

such signature or to the validity of the 

underlying document, certificate, 

notice, instrument, or agreement on the 

basis of the signature’s legal effect, 

validity or enforceability solely because 

it is in facsimile or electronic form. 

Article 7. Entry Into Force 

Section 7.1 Conditions Precedent to 

Entry Into Force 

Before this Compact enters into force: 

(a) The PIA must have been signed by 

the parties thereto; 

(b) The Government must have 

delivered to MCC: 

(i) A legal opinion from the Secretary 

of Justice of the Philippines (or such 

other legal representative of the 

Government acceptable to MCC), in 

form and substance satisfactory to MCC; 

and 

(ii) Complete, certified copies of all 

decrees, legislation, regulations, or other 

governmental documents relating to the 

Government’s domestic requirements 

for this Compact to enter into force, 

which MCC may post on the MCC Web 

site or otherwise make publicly 

available; and 

(c) MCC must determine that, after 

signature of this Compact, the 

Government has not engaged in a 

pattern of actions inconsistent with the 

eligibility criteria for MCC Funding. 

Section 7.2 Date of Entry Into Force 

This Compact will enter into force on 

the date of the last letter in an exchange 

of letters between the Principal 

Representatives confirming that each 

Party has completed its domestic 

requirements for entry into force of this 

Compact and that the conditions 

precedent to entry into force of Section 

7.1 have been met. The letter from the 

Government will contain an affirmation 

of the Government’s commitment to its 

obligations hereunder and under the 

Program Implementation Agreement. 

Section 7.3 Compact Term 

This Compact will remain in force for 

five (5) years after its entry into force, 

unless terminated earlier under Section 

5.1 (the ‘‘Compact Term’’). 

Section 7.4 Provisional Application 

Upon signature of this Compact and 

until this Compact has entered into 

force in accordance with Section 7.2, 

the Parties will provisionally apply the 

terms of this Compact and the PIA; 

provided that, no Program Funding will 

be made available or disbursed before 

this Compact enters into force. 


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Article 8. Additional Government 

Covenants 

Section 8.1 Project Covenants 

(a) KALAHI–CIDSS Project. With 

regard to the KALAHI–CIDSS Project, 

the Government agrees that: 

(i) Throughout the Compact Term, the 

Department of Social Welfare and 

Development (‘‘DSWD’’) will use the 

classification system approved by MCC 

to assess and classify every proposed 

sub-project, and provide the engineering 

design and oversight support 

appropriate to the classification of such 

sub-project; and 

(ii) For those municipalities that are 

randomly selected to be included in the 

control group, DSWD will not (1) 

provide KALAHI–CIDSS funding, or (2) 

provide other programs of DSWD on a 

systematic basis, in both cases for the 

duration of the Compact Term. 

(b) Revenue Administration Reform 

Project. With regard to the Revenue 

Administration Reform Project, the 

Government agrees to implement the 

following prior to the initial 

disbursement of any Program Funding 

for the Revenue Administration Reform 

Project: 

(i) To the full extent allowed by 

existing law, procedures shall be put in 

place wherein decisions of the 

Commissioner of Internal Revenue and 

the Commissioner of Customs in all 

graft-related cases shall be transmitted 

promptly to the Secretary of Finance, 

the head of the Revenue Integrity 

Protection Service created under 

Executive Order No. 259, s. 2003, who 

shall then immediately forward them to 

the Revenue Integrity Protection Service 

to review the said cases and determine 

their compliance with existing laws and 

procedures. If warranted by the 

evidence on record and any additional 

evidence it gathers, the Revenue 

Integrity Protection Service shall file the 

necessary complaint(s) with the office of 

the ombudsman or other appropriate 

administrative body or agency of 

competent jurisdiction. 

(ii) The Revenue Integrity Protection 

Service shall actively exercise its 

powers pursuant to Executive Order No. 

259, to ensure the proactive pursuit of 

graft-related programs, policies and 

procedures by the internal inspection 

units of the revenue agencies under the 

Department of Finance. These actions 

shall include, but may not be limited to, 

the conduct of operational audits of said 

units. 

(iii) The Bureau of Internal Revenue 

and the Bureau of Customs internal 

audit units will be reorganized directly 

under the Office of the Commissioner. 

In Witness Whereof, the undersigned, 

duly authorized by their respective 

governments, have signed this Compact. 

Done at New York, NY, this 23rd day of 

September 2010, in the English language 

only. 

For Millennium Challenge Corporation, on 

behalf of the United States of America. 

Daniel W. Yohannes, 

Chief Executive Officer. 

For the Republic of the Philippines. 

Cesar V. Purisima, 

Secretary of Finance. 

Annex I Program Description 

This Annex I describes the Program that 

MCC Funding will support in the Philippines 

during the Compact Term. 

A. Program Overview 

1. Background and Consultative Process 

The Philippines was declared eligible for 

MCC assistance in March 2008. With a 

population of approximately 90 million 

inhabitants, the 7,107 islands of the 

Philippines cover a combined area of 115,830 

square miles. Despite unprecedented growth 

gains over the past decade, accompanied by 

moderate inflation, the Philippines continues 

to face severe constraints to reducing 

poverty. In an effort to prioritize its 

development spending, the Government 

elaborated a national medium-term 

development plan and several sector 

strategies, and undertook an analysis of 

constraints to economic growth. Priorities 

were identified for increased social sector 

spending, improvements to basic 

infrastructure, and improvements to 

governance, and were confirmed through a 

number of national, regional, and local 

consultations from early 2007 through early 

2009. 

The Program has been designed by the 

Government, building upon initiatives from 

numerous donors, non-governmental 

organizations, and the domestic private 

sector to spur growth in economically 

depressed or vulnerable regions and to 

provide a platform for continued poverty 

reduction efforts. The Program will enable 

the Government to increase resources 

available for high-priority expenditures and 

target Government initiatives toward some of 

the poorest regions and municipalities in the 

archipelago. 

2. Program Objective 

The Program Objective is to: (a) Increase 

the incomes of Filipinos through the benefits 

of community-driven sub-projects; (b) obtain 

time savings and lower transportation costs 

for road users in Program areas; and (c) 

increase investment and government 

expenditure due to an increase in tax revenue 

and a reduction in corruption. 

3. Environmental and Social Safeguards 

The Program will be implemented in 

compliance with the MCC Environmental 

Guidelines, MCC guidance on the integration 

of gender in program implementation, and 

MCC’s guidance on the implementation of 

resettlement activities (or any other MCC 

policy comparable to the World Bank’s 

Operational Policy on Involuntary 

Resettlement in effect as of July 2007) (‘‘OP 

4.12’’). The Government will also ensure that 

the Projects comply with all national 

environmental laws and regulations, licenses 

and permits, except to the extent such 

compliance would be inconsistent with this 

Compact. The Government will: (a) 

Cooperate with any ongoing environmental 

review, or if necessary undertake and 

complete any additional environmental 

reviews required by MCC or under the laws 

of the Philippines; (b) implement to MCC’s 

satisfaction environmental and social 

mitigation measures identified in such 

environmental review; and (c) fund the costs 

of environmental mitigation (including costs 

of resettlement) that exceed the MCC 

Funding specifically allocated for such costs 

in the budget for any Project. To maximize 

the positive social impacts of the program, 

the Government will take steps to address 

cross-cutting social and gender-specific 

issues, including, but not limited to, 

combating human trafficking and HIV/AIDS, 

during Compact implementation. 

B. Description of the Projects 

Set forth below is a description of each of 

the Projects that the Government will 

implement, or cause to be implemented, 

using MCC Funding to advance the 

applicable Project Objective. In addition, 

specific activities that will be undertaken 

within each Project (each, an ‘‘Activity’’), 

including sub-activities, are described. 

1. KALAHI–CIDSS Project 

(a) Background. 

The Philippines lags significantly behind 

other countries in the region with respect to 

government development expenditures as a 

percentage of GDP and infrastructure 

investment and quality. The Asian 

Development Bank’s 2007 growth diagnostic 

report found that inadequacies in 

infrastructure are a critical constraint to 

growth and that the availability of basic 

infrastructure (water, sanitation, roads, 

electricity) is regressive. While human 

capital was not found to be a critical 

constraint to growth, inadequate human 

capabilities are often an underlying cause of 

poverty. Provision and use of education and 

health services were found to vary across 

regions, particularly as a function of incomes. 

Community driven development projects are 

a strategy for addressing these constraints 

and providing community empowerment and 

poverty reduction. In the past, they have 

been used to support a wide range of 

community priority needs including 

provision of water supply and nutrition 

programs for women and children; building 

of school, day care and health facilities, farm 

to market roads, foot bridges, and drainage 

systems; and support for productive 

enterprises such as pre- and post-harvest 

facilities as well as community capacity 

building. 

Kapit bisig Laban sa Kahirapan (‘‘Linking 

Arms Against Poverty’’)—Comprehensive 

Integrated Delivery of Social Services 

(‘‘KALAHI–CIDSS’’) is a community driven 

development project implemented by DSWD 

of the Philippines. Through KALAHI–CIDSS, 

communities (‘‘barangays’’ or villages) are 

trained, together with their local 


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governments, both at the barangay and the 

municipal level, to choose, design and 

implement sub-projects that are intended to 

address their most pressing needs. This is 

done through a four-year program, which 

includes one year of ‘‘social preparation’’ 

training for communities, barangays and 

municipalities, followed by 3 ‘‘cycles’’ of subproject implementation. The KALAHI–CIDSS 

project to be funded by MCC (the ‘‘KALAHI– 

CIDSS Project’’) is an expansion of an initial 

KALAHI–CIDSS project (‘‘KC1’’) that was 

implemented between 2003 and 2010. KC1 

was funded by a loan from the World Bank. 

During KC1 implementation, the World Bank 

and DSWD were able to ensure that the 

project incorporated lessons learned and 

reinforced elements that had been shown to 

work well. 

The KALAHI–CIDSS Project is particularly 

well suited to the sociopolitical environment 

in the Philippines. Following 

decentralization, local governments have a 

responsibility to provide basic services, yet 

suffer from a lack of development resources. 

This issue is compounded by the geographic 

distribution of poverty in the Philippines. 

Poverty in the country is correlated with 

rural isolation and distance from towns and 

urban centers, meaning that the communities 

that have the greatest needs for basic services 

are the ones that are most difficult to reach. 

Community-driven development offers an 

alternative, needs-based approach that 

provides development resources for basic 

services directly to the poorest communities, 

specifically targeting those in far-flung areas, 

while at the same time building the capacity 

of local government to be responsive to these 

needs over time. It is because of this 

contextualized approach that KC1 has 

already met with considerable success. 

(b) Project. 

The objectives of the KALAHI–CIDSS 

Project are to: 

• Improve the responsiveness of local 

governments to community needs; 

• Encourage communities to engage in 

development activities; and 

• Deliver benefits to barangay residents 

through the individual sub-projects. 

In conjunction with DSWD, MCC will 

incorporate a number of enhancements to 

KC1 into the KALAHI–CIDSS Project, all of 

which are supported by lessons learned from 

KC1 and desires expressed by KALAHI– 

CIDSS Project stakeholders. These 

refinements include, but are not limited to: 

(i) Dedicated gender staff positions and 

gender-focused activities, including the 

provision of ‘‘gender incentive grants’’ to 

communities; (ii) reinforced financial 

controls on the Project, including an 

additional set of transaction and technical 

audits; (iii) dedicated staff positions to 

explore private-sector involvement 

opportunities within municipalities included 

in the KALAHI–CIDSS Project; (iv) 

development of a set of user-friendly 

community tools to assess environmental 

impact and ensure the KALAHI–CIDSS 

Project’s environmental sustainability; (v) a 

management information system to enable a 

much greater level of data capture at the 

barangay and municipal level, including a 

‘‘geographic information system’’ component; 

(vi) a rigorous impact evaluation to assess the 

KALAHI–CIDSS Project’s impact on social 

capital and welfare measures using a rigorous 

random selection technique that allows the 

measurement of attribution; and (vii) support 

for a joint advisory board to oversee the 

impact evaluation, composed of members 

from MCC, MCA–Philippines, the World 

Bank, DSWD, the National Economic 

Development Authority, and local academics. 

The KALAHI–CIDSS Project will cover 

municipalities that have a poverty incidence 

higher than the national average and that are 

not in the Mindanao island group. The 

KALAHI–CIDSS Project consists of the 

following Activities: 

(i) Capacity Building and Implementation 

Support Activity. 

MCC Funding will be granted to DSWD to 

provide the staff salaries and trainings for the 

DSWD frontline workers, known as the area 

coordinating teams. These teams are made up 

of a standard staffing complement and there 

will be one team for each municipality in the 

KALAHI–CIDSS Project. The role of the area 

coordinating team is to carry out the 

‘‘Community Empowerment Activity Cycle.’’ 

This framework follows a progression of 

strategies and activities as a gradual ‘‘hand 

off’’ to local government of responsibilities 

takes place over the course of three cycles. 

During each cycle, barangays hold a series of 

meetings that are facilitated by members of 

the area coordinating team at which barangay 

residents identify and prioritize constraints 

to economic activities within their 

communities and then identify and prioritize 

solutions to these constraints. Finally, the 

barangay selects one constraint and 

associated solution for presentation by 

elected community representatives to the 

‘‘Municipal Inter-Barangay Forum.’’ At the 

municipal level, two Municipal InterBarangay Forums are held, the first to 

determine the criteria by which the 

community representatives will prioritize the 

barangay sub-projects for funding and the 

second to prioritize them according to such 

criteria. At the conclusion of each of the 

three cycles of sub-project implementation, 

there is a transition and reporting period. The 

entire Community Empowerment Activity 

Cycle process is facilitated by the area 

coordinating team, with various team 

members responsible for ensuring that 

processes are transparent and in accordance 

with the KALAHI–CIDSS Project manuals as 

revised by MCC. This Activity also supports 

the existing grievance redress system. 

(ii) Grants for Community Projects 

Activity. 

MCC Funding will be granted to DSWD, to 

be used by DSWD to plan and implement 

community-chosen sub-projects in 

accordance with the KALAHI–CIDSS Project 

manuals approved by MCC. Specifically, the 

KALAHI–CIDSS Project provides grants for 

livelihood activities and the construction, 

repair and improvement/upgrading of smallscale rural infrastructure sub-projects 

identified by the community. The 

municipalities and barangays in which subproject activities will occur will make cash 

and in-kind contributions (including 

partially-paid labor and local materials) to 

the sub-projects equal, in each case, to at 

least 30 percent of the total sub-project costs. 

The grant allocated to the municipal local 

governments to fund sub-project 

implementation is proportionate in size to 

the number of barangays within that 

municipality. Suppliers and contractors will 

be selected according to the procedures in 

the ‘‘Community-Based Procurement 

System.’’ This procurement system was 

specifically designed for implementing the 

KALAHI–CIDSS Project taking into account 

the nature of the procurements, the local 

market conditions and the local capacities. 

At the community level an ‘‘Audit and 

Inventory Committee’’ is responsible for 

auditing the financial records and reports of 

the community and conducting a regular 

inventory of all properties acquired by the 

community. The community’s books and 

records are open at all times to all members 

of the community for inspection. 

Communities have the opportunity to 

select from a variety of sub-projects, many 

which involve the selection, design, and 

construction of small infrastructure subprojects. DSWD—in cooperation with local 

governments—will build the capacity of 

communities through trainings and other 

methods and provide guidance and oversight 

throughout the process. In cooperation with 

DSWD, MCC will create a detailed risk 

profiling system for sub-projects and a 

complementary risk-based management 

approach to oversight that may affect the way 

that the grants are spent within the Grants for 

Community Project Activity. 

(iii) Project Management Activity. 

MCC Funding will be granted to DSWD to 

provide salaries and training for DSWD 

project management staff at the regional and 

national level. These funds will also be used 

for the office space, conferences, capacity 

building and project monitoring associated 

with the project management activity. Goods 

to support this activity will be procured by 

MCA-Philippines. 

(c) Beneficiaries. 

In the project catchment areas (i.e. those 

municipalities that will receive support from 

the KALAHI–CIDSS Project), 16 to 20 percent 

of the households have a female head, while 

the young and elderly constitute a significant 

fraction of the expected beneficiaries. The 

Project is expected to benefit approximately 

5.2 million Filipinos 20 years after the 

Compact enters into force. Of these, 39 

percent consume below the poverty line of 

US$2 (in 2005 PPP US dollars) per day 

(compared to 28 percent of the national 

population). As for the extreme poor, 13 

percent of the Project’s beneficiaries consume 

below US$1.25 a day (compared to 9 percent 

of the national population). And as for the 

non-poor, only 26 percent of this Project’s 

beneficiaries consume above US$4 a day (as 

opposed to 38 percent of the national 

population). Overall, the Project is welltargeted to the poor. 

(d) Donor Coordination. 

MCC worked closely with the World Bank 

on issues of targeting and impact evaluation 

strategy over the course of project 

development in 2009. As of January 2010, the 

World Bank intends to provide an additional 

loan to expand KC1. The World Bank and 

MCC plan to continue close collaboration 


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1 ‘‘Philippines: Critical Development Constraints,’’ 

Asian Development Bank, December 2007. 

during and beyond the scope of this 

additional funding and share lessons learned 

with each other and with DSWD as KALAHI– 

CIDSS continues to mature and develop 

towards a potential national expansion that 

could involve many other donors. MCC will 

also be joining DSWD’s donor forum related 

to KALAHI–CIDSS. 

(e) USAID. 

The United States Agency for International 

Development (‘‘USAID’’) has had significant 

experience with community-based 

development that targets poor communities, 

and the ‘‘Growth with Equity in Mindanao’’ 

Program has provided a number of lessons 

for the implementation of the KALAHI– 

CIDSS Project as it relates to smallinfrastructure construction specifically. 

Approximately 60 percent of USAID’s 

program funding is provided to Mindanao 

and the agency aims to continue these 

investments and others like it in the region. 

Therefore, USAID, the World Bank and MCC 

agreed that MCC would concentrate its 

KALAHI–CIDSS Project in the Luzon and 

Visayas regions thereby broadening the reach 

of such programs throughout the Philippines. 

(f) Sustainability. 

The implementation methods used in this 

Project emphasize transparency and 

accountability in local decision making, 

attributes which enable small infrastructure 

sub-projects to contribute to a more 

empowered citizenry, a more responsive 

government and ultimately to more 

sustainable community assets. The process of 

involving communities in sub-project 

activities builds their capacity to take charge 

of their own development within the 

KALAHI–CIDSS Project and beyond, reduces 

corruption, increases accountability for the 

use of resources and results in more and 

better distributed assets as communities 

build a sense of ownership around these 

assets. 

DSWD will use a set of sustainability and 

functionality evaluation tools to assess MCCfunded sub-projects and will target those subprojects experiencing sustainability-related 

difficulties with additional resources to 

resolve them. MCC’s risk profiling and risk 

management approach described above will 

also contribute to sub-project sustainability 

by ensuring that the most risk-prone projects 

are designed and constructed to minimize 

risk, reducing the likelihood of sub-project 

failure. 

The sustainability of the KALAHI–CIDSS 

Project and its ability to attract new and 

continued resources from both the 

Government and other donors is closely 

related to its ability to demonstrate 

continuing project successes as it moves 

towards a national scale. MCC Funding will 

be used for a robust impact evaluation that 

will assist the Government in evaluating the 

effectiveness of the community-driven 

development model. 

2. Secondary National Roads Development 

Project 

(a) Background. 

Road transportation is the dominant 

transport mode in the Philippines, 

accounting for 53 percent of freight tonkilometers and 89 percent of passenger tonkilometers. The Philippines has a total road 

network of about 200,000 km, including 

about 29,000 km of national roads. 

Approximately 79 percent of the national 

arterial roads are paved, and 48 percent of 

these require rehabilitation.1

Inter- and intra-island transport systems 

have a crucial role in supporting the 

economic development of the widely 

dispersed regions of the Philippine 

archipelago. However, the present inadequate 

condition of infrastructure facilities and lack 

of reliable, safe, and efficient transport 

services significantly hamper the movement 

of passengers and cargo throughout the 

country, thus limiting direct internal and 

external trade links and tourism, and 

constituting a major constraint to increased 

regional economic growth. This is 

particularly true in many poor areas of the 

Philippines, where adequate accessibility has 

the potential to lower marketing costs for 

local agricultural products, improve access of 

the local population to social services and 

economic opportunities, and be a catalyst for 

investments to develop local resources. 

(b) Project. 

The objectives of the Project to be funded 

by MCC in respect of the sections of the 

Samar road described below (the ‘‘Secondary 

National Roads Development Project’’) are to: 

(i) Save time; and (ii) lower vehicle operating 

costs for those Filipinos living near the roads. 

This Project consists of the following 

Activity: 

(i) Samar Road Activity. 

MCC Funding will be used to reconstruct 

and rehabilitate 220 km of the Samar road 

crossing the provinces of Samar and Eastern 

Samar, of which approximately 180 km will 

undergo reconstruction/major rehabilitation 

while 40 km will receive only minor 

rehabilitation, as well as the replacement or 

upgrading of associated structures, such as 

bridges and culverts, to eliminate flooding 

and improve road safety. The road begins at 

the junction of Highway-Buray Wright (km 

827 + 200) in Samar, and traverses eastward 

along primarily mountainous terrain to Taft 

(km 890 + 000). From Taft, it continues 

southward, along the coastline of Eastern 

Samar, ending in the town of Guiuan (km 

1047 + 300). The section of road from Wright 

to Taft is an important east-west corridor 

providing inter-provincial connection 

between Samar and Eastern Samar. The 

section of the road from Taft to Guiuan 

provides the only access to 13 coastal 

municipalities. The capital of Eastern Samar, 

Borongan, is located centrally on this section 

of the road. 

(1) Construction costs. These costs include, 

without limitation, pavement rehabilitation 

and strengthening, embankment 

construction, road safety improvements, 

replacement or upgrading of associated 

structures, such as bridges, drainage systems 

and culverts, and any activity associated with 

the environmental management plan 

developed with respect to the Samar Road 

Activity. 

(2) Non-construction costs. These costs 

include, without limitation, studies, 

construction supervision, environmental and 

social mitigation (including resettlement), 

and other project management costs and 

technical assistance to be incurred in 

connection with the Samar Road Activity. 

(c) Beneficiaries. 

A 2006 household survey shows that in 

this Project’s regions, two of the most 

common occupations for household heads 

are farmers and drivers. These people would 

be expected to rely significantly on 

transportation infrastructure. The survey 

indicates, in addition, that from 16 to 20 

percent of households have a female head, 

while the young and elderly constitute 

significant fractions of household members 

in the Project regions. Improvement of the 

road will benefit the users and owners of 

motorized vehicles, including laborers, 

enterprises, consumers and tourists. 

Estimates of the total number of beneficiaries 

are based upon a percentage of the 

populations of municipalities through which 

this road will pass. 

The beneficiary analysis conducted as part 

of the project appraisal process has estimated 

that approximately 282,000 people will 

benefit from rehabilitation of the Samar road. 

Thirteen percent of the beneficiaries are 

estimated to consume below the poverty line 

of US$1.25 per day in 2005 PPP US dollars, 

while 42 percent of project beneficiaries are 

estimated to consume below US$2 per day. 

Relative to the national distribution of 

consumption, the beneficiaries of the Samar 

road are substantially poorer. Aggregated 

over 25 years, beneficiaries are expected to 

accumulate an increment equal to 86 percent 

of their 2009 annual (median) income due to 

this Project. 

(d) Donor Coordination. 

The Secondary National Road 

Development Project is anchored on 

preliminary work undertaken with the 

assistance of Japan Bank for International 

Cooperation (now known as the Japan 

International Cooperation Agency), which 

was instrumental in identifying viable 

priority road segments eligible for MCC 

investments. 

MCC has coordinated closely with the 

World Bank on the ongoing efforts in: 

(i) Road sector reform; (ii) improving the 

adequacy of the ‘‘Special Road Support 

Fund’’ (as described below); (iii) improving 

governance structure for the Special Road 

Support Fund; (iv) standardizing measures 

and approaches used to combat corruption 

and to increase accountability (funded by the 

Australian Agency for International 

Development) during project execution; and 

(v) standardizing technical audits. 

(e) USAID. 

While USAID is not currently active in 

secondary national road rehabilitation in the 

Philippines, USAID’s ‘‘Growth with Equity in 

Mindanao’’ Program mentioned above 

includes the development of road 

infrastructure. 

(f) Sustainability. 

There are two main sources of public 

finance for the national road network: 

(i) The General Appropriations Act; and (ii) 

a ‘‘Special Road Support Fund’’ that is 

financed by the imposition of a motor vehicle 

user charge. The overall resources devoted to 

the national road sector have increased 

considerably since 2004. 


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2 ‘‘Philippines: Critical Development Constraints,’’ 

Asian Development Bank, December 2007, p. 49. 

3 Ibid. p. 26. 

Despite the large increases, there remains 

a considerable gap (about 30 billion 

Philippine pesos) between the sector’s need 

and the projected resource allocation. To 

meet the overall needs of the sector and 

reduce the existing gap, greater funding is 

required from three sources. The first source 

is increased government budgetary 

allocations for the sector. The second source 

is the private sector, the resources of which 

can be utilized for network expansion when 

roads involve expressways that can be 

subject to tolling arrangements. The third 

source of revenue is the Special Road 

Support Fund. To improve sustainability, the 

Government needs to augment revenues from 

the motor vehicle user charge through raising 

the current charge, indexing such charge to 

the general price level, and by introducing a 

fuel levy. 

3. Revenue Administration Reform Project 

(a) Background. 

The Asian Development Bank cited the 

Philippines’ tight fiscal situation as one of its 

most significant constraints to growth.2 One 

consequence of the Philippines’ tight fiscal 

situation is its limited ability to fund its 

growing needs for basic infrastructure and 

social programs and, thereby, to reduce 

poverty. The Philippines has seen a declining 

rate of tax effectiveness, i.e. tax revenues 

divided by GDP, in recent years due in part 

to legislated reductions in corporate tax rates 

and increases in personal exemptions. 

In addition, tax-related patterns of noncompliance and tax administration 

inefficiencies contribute to a poor business 

climate and, ultimately, to a reduced rate of 

domestic investment. Since the Asian 

financial crisis of 1997, the Philippines has 

ranked the lowest among its major regional 

neighbors in foreign direct investment.3 The 

Philippines has struggled in recent years to 

improve its international rankings with 

regard to corruption. 

MCC supported some of the Government’s 

anti-corruption efforts through MCC’s 

Philippines Threshold Program that sought to 

improve the Government’s office of the 

ombudsman’s pursuit of tax evaders and 

smugglers as well as to roll out nationwide 

the Integrated Tax System in offices of the 

Bureau of Internal Revenue (‘‘BIR’’). Several 

of the themes of MCC’s Philippines 

Threshold Program have carried over into 

this Project. 

(b) Project. 

The objectives of the Project to be 

supported by MCC Funding in connection 

with the reform of tax collection in the 

Philippines (the ‘‘Revenue Administration 

Reform Project’’) are to increase tax revenues 

over time and to support the Department of 

Finance’s initiatives to detect and deter 

corruption within its revenue agencies. The 

Project consists of two Activities as further 

described below: (i) An Activity focused on 

BIR’s efforts to re-engineer its policies and 

practices and to implement the electronic 

Tax Information System (‘‘eTIS’’); and (ii) an 

Activity focused on supporting the 

Philippines’ Revenue Integrity Protection 

Service (‘‘RIPS’’) the anti-graft investigation 

unit within the Department of Finance. In 

turn, the BIR-focused Activity will consist of 

three sub-activities as further described 

below: (1) The implementation of eTIS; (2) 

the utilization of automated auditing tools in 

the large taxpayer unit; and (3) a public 

awareness campaign to disseminate 

information about BIR’s reform and 

enforcement activities. 

(i) BIR Revenue Administration Reform 

Activity. 

(1) eTIS sub-Activity. 

MCC Funding will provide an International 

Monetary Fund (‘‘IMF’’) resident advisor on 

tax administration, and support the cost of 

short-term IMF tax administration specialists 

as well as other systems and technology 

consultants, the training of BIR staff, and the 

procurement of equipment related to the 

implementation of eTIS. This sub-Activity 

will improve the trustworthiness of data, 

increase access to that data, and improve the 

actions and decisions based on that data. 

From a tax administration perspective these 

results can be described as improving 

compliance monitoring, reducing client 

contact and the concomitant opportunities 

for negotiated assessments, increasing the 

likelihood of the detection of misreporting, 

and improving the value of reports. These are 

the components that will contribute to a 

sustainable program of tax administration 

with improved compliance, audit and 

enforcement tools. 

(2) Automated Auditing Tools SubActivity. 

MCC Funding will purchase software 

licenses for automated auditing tools and 

provide computers to run them. MCC 

Funding will also pay for a subscription to 

a data base service to provide BIR with 

transfer pricing information and provide 

training for the use of these tools. The 

automated auditing tools will leverage a 

recent BIR decision that requires large 

taxpayers to maintain and submit tax records 

in digital form and will also expand on a 

pilot program sponsored by the Swedish 

International Development Agency that 

demonstrates the values of these tools. These 

auditing tools have demonstrated their 

revenue-raising potential, and they also 

reduce by half the number of days it takes to 

complete an audit. These tools also remove 

one taxpayer concern about the fairness of an 

audit that is based on sampling rather than 

a review of all transactions. The reduction in 

man days per audit will help the BIR to 

reduce its backlog of unfinished audits. 

(3) Public Awareness Campaign SubActivity. 

MCC Funding will provide consulting 

services and support the costs of 

implementing a public awareness campaign 

regarding BIR services and programs. 

Individuals and businesses in the Philippines 

have a limited understanding of their tax 

obligations and BIR programs. Many BIR 

services—particularly on-line services—are 

under-utilized. Greater understanding of tax 

obligations, and an increased ability to access 

tax information, should lead to better 

compliance. It is also hoped that, as with the 

eTIS sub-Activity, utilization of on-line 

services will reduce the opportunities for 

corruption that in-person transactions may 

provide. The public awareness campaign is 

intended to promote increased compliance 

with tax rules and thus increased revenue 

collection through better public and business 

awareness of the BIR’s plans, programs, 

initiatives, policies and practices. 

(ii) RIPS Activity. 

MCC Funding will fund the acquisition 

and customization of case management 

software, a related data depository system, 

and training. This will support RIPS, a 

relatively new unit within the Department of 

Finance, and is intended to strengthen 

surveillance and discipline of the 

Department of Finance and its attached 

agencies through administrative actions such 

as temporary suspensions or dismissals. 

Experience in MCC’s Philippines Threshold 

Program showed that actions taken through 

the courts in the Philippines are slow and 

that, even when a conviction is secured, 

punishment is likely to be deferred and/or 

reduced through subsequent appeals. For that 

reason, this Activity focuses on trying to 

detect and punish those forms of malfeasance 

that permit revenue agents to reap financial 

rewards from taxpayers. By increasing the 

likelihood of detection and punishment, the 

frequency of such incidents will decline. If 

effective, this should improve the image of 

revenue generating agencies and also support 

increased collections and improve the 

business climate within the Philippines. 

(g) Beneficiaries. 

Beneficiary analysis for the Revenue 

Administration Reform Project is undertaken 

at the level of the overall Project since the 

incidence of benefits from each Activity is 

expected to be spread broadly throughout the 

Philippine population. Accordingly, 

aggregation at the Project level is reasonable. 

Identifying beneficiaries in this broadbased, national program is challenging. It is 

reasonable to expect, however, that a 

majority of the population of the Philippines 

will—due to increased public revenues and 

expenditures or domestic investments—enjoy 

at least a small increase to their incomes over 

the benefits horizon of 2011 to 2030. 

Accordingly, MCC estimates (conservatively) 

that 85 percent of the country’s population, 

which will be approximately 125 million 

people, are beneficiaries of this Project by 

2030. Consequently, the distribution of the 

Revenue Administration Reform Project’s 

benefits by poverty level mirrors the national 

population’s poverty distribution. 

Since rates of access to health and 

education services are already relatively high 

in the Philippines, most Project impacts will 

be realized as increases in quality and 

reliability of existing services. As a 

consequence, and also due to the large 

number of beneficiaries expected for the 

project, per-beneficiary benefits are fairly 

modest. 

(h) Donor Coordination. 

The due diligence for the tax 

administration aspects of the Revenue 

Administration Reform Project was 

undertaken in close cooperation with the 

IMF’s Fiscal Affairs Division as well as with 

the World Bank’s National Program 

Supporting Tax Administration Reform 

program to support tax reform efforts in the 


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Philippines. The outlines of the eTIS subActivity and its emphasis on process 

redesign and training are based on longstanding recommendations that have been 

made by the IMF and World Bank to the BIR. 

It is anticipated that the tax administration 

advisors provided to the BIR under the 

Compact will be sourced through the IMF 

and coordinated by a resident IMF advisor in 

Manila, the Philippines. 

The Automated Audit Tools sub-Activity 

builds on the previous efforts of the Swedish 

International Development Agency and the 

World Bank. Both donors have sponsored 

pilot programs in the utilization of automated 

audit tools. 

(i) USAID. 

MCC’s due diligence relied heavily on the 

reports and findings of MCC’s Philippines 

Threshold Program administered by USAID. 

That program included support for anticorruption activities under the aegis of the 

office of the ombudsman, and assistance to 

the Department of Finance’s anti-corruption 

units, as well as the extension of the 

Integrated Tax System (eTIS’ predecessor) to 

regional offices that had not previously been 

able to implement that system. The lessons 

learned under MCC’s Philippines Threshold 

Program were the basis for decisions to focus 

on internal administrative disciplinary 

procedures (the focus of the RIPS Activity) 

rather than the pursuit of tax evaders and 

smugglers through the courts, to broaden the 

scope of tax administration, and to focus 

more resources on training and process 

redesign than on hardware and software. 

(j) Sustainability. 

A critical ingredient to the success of this 

complex undertaking is the continued 

commitment of the Department of Finance to 

embark on a program that is likely to meet 

with staff as well as taxpayer resistance and 

to manage the personnel, organizational and 

technical issues that will require both vision 

and resolve. Maintaining that commitment 

over the course of the Compact Term will be 

a test of BIR’s and the Department of 

Finance’s management skills and staff 

capacity. 

(k) Policy, Legal, Regulatory and Other 

Reforms. 

The Department of Finance has completed 

or committed to complete a number of 

policy, legal, regulatory and other reforms in 

order to achieve success under this Project. 

These reforms are referenced in the Compact, 

the Program Implementation Agreement, and 

in other documents. 

4. Implementation Framework 

(a) Overview. 

The implementation framework and the 

plan for ensuring adequate governance, 

oversight, management, monitoring and 

evaluation, and fiscal accountability for the 

use of MCC Funding are summarized below. 

MCC and the Government will enter into the 

Program Implementation Agreement, and any 

other agreements in furtherance of this 

Compact, all of which, together with this 

Compact, set out certain rights, 

responsibilities, duties and other terms 

relating to the implementation of the 

Program. 

(b) MCC. 

MCC will take all appropriate actions to 

carry out its responsibilities in connection 

with this Compact and the Program 

Implementation Agreement, including the 

exercise of its approval rights in connection 

with the implementation of the Program. 

(c) MCA-Philippines. 

In accordance with Section 3.2(b) of this 

Compact, MCA-Philippines will act on the 

Government’s behalf to implement the 

Program and to exercise and perform the 

Government’s rights and responsibilities with 

respect to the oversight, management, 

monitoring and evaluation, and 

implementation of the Program, including, 

without limitation, managing the 

implementation of Projects and their 

Activities, allocating resources, and 

managing procurements. The Government 

will ensure that MCA-Philippines takes all 

appropriate actions to implement the 

Program, including the exercise and 

performance of the rights and responsibilities 

designated to it by the Government pursuant 

to this Compact and the Program 

Implementation Agreement. Without limiting 

the foregoing, the Government will also 

ensure that MCA-Philippines has full 

decision-making autonomy, including, inter 

alia, the ability, without consultation with, or 

the consent or approval of, any other party, 

to: (i) Enter into contracts in its own name; 

(ii) sue and be sued; (iii) establish Permitted 

Accounts in a financial institution in the 

name of MCA-Philippines and hold MCC 

Funding in such accounts; (iv) expend MCC 

Funding; (v) engage a fiscal agent who will 

act on behalf of MCA-Philippines on terms 

acceptable to MCC; (vi) engage one or more 

procurement agents who will act on behalf of 

MCA-Philippines, on terms acceptable to 

MCC, to manage the acquisition of the goods, 

works, and services required by MCAPhilippines to implement this Compact; and 

(vii) competitively engage one or more 

auditors to conduct audits of its accounts. 

The Government will take the necessary 

actions to establish and maintain MCAPhilippines, in accordance with the terms 

hereof including the applicable conditions 

precedent to the Disbursement of Compact 

Implementation Funding set forth in Annex 

IV to this Compact. 

MCA-Philippines will be administered and 

managed by a Board of Trustees and a 

Management Unit. In addition, MCAPhilippines will have a Stakeholders’ 

Committee to continue the consultative 

process during implementation of the 

Program. The governance of MCAPhilippines will be set forth in more detail 

in the Establishment Decree, the Program 

Implementation Agreement, and the internal 

regulations of MCA-Philippines (‘‘MCAPhilippines Bylaws’’), which will, 

collectively, set forth the responsibilities of 

the Board of Trustees, the Stakeholders’ 

Committee and the Management Unit. The 

MCA-Philippines Bylaws will be developed 

and adopted in accordance with MCC’s 

Guidelines for Accountable Entities and 

Implementation Structures, published on the 

MCC Web site (the ‘‘Governance Guidelines’’), 

and will be in form and substance 

satisfactory to MCC. 

(i) Board of Trustees. 

(1) Composition. MCA-Philippines will be 

governed by a board of trustees (the ‘‘Board 

of Trustees’’), which will consist of voting 

members representing those Government 

departments and civil society and private 

sector organizations set forth in the 

Establishment Decree and the MCAPhilippines Bylaws. The Board of Trustees 

will also consist of those non-voting 

observers set forth in the MCA-Philippines 

Bylaws. All voting members will be selected 

in accordance with the MCA-Philippines 

Bylaws and must be sufficiently senior and 

qualified to make decisions on behalf of their 

respective ministries and civil society and 

private sector organizations, as applicable. 

Each voting member named to serve on the 

Board of Trustees, and any replacement for 

any voting member or any alteration of the 

size or composition of the Board of Trustees, 

will be subject to MCC prior approval. 

(2) Roles and Responsibilities. The Board 

of Trustees will be responsible for overseeing 

the implementation of the Program and will 

have final decision-making authority over the 

implementation of the Program. The Board of 

Trustees will meet regularly; the frequency of 

meetings will be set forth in the MCAPhilippines Bylaws and will be in 

accordance with the Governance Guidelines. 

The specific roles of the voting members and 

non-voting observers will be set forth in the 

Establishment Decree and the MCAPhilippines Bylaws. 

(ii) Stakeholders’ Committee. 

(1) Composition. The composition of the 

Stakeholders’ Committee will be selected in 

accordance with the MCA-Philippines 

Bylaws and the Governance Guidelines and 

subject to MCC approval (the ‘‘Stakeholders’ 

Committee’’). Without limiting the foregoing, 

the Establishment Decree provides that the 

Stakeholders’ Committee will be composed 

of, inter alia, representatives from nongovernmental organizations, civil society, 

private sector, and local and regional 

government Program beneficiaries. 

(2) Roles and Responsibilities. Consistent 

with the Governance Guidelines, the 

Stakeholders’ Committee will be responsible 

for continuing the consultative process 

throughout implementation of the Program. 

While the Stakeholders’ Committee will not 

have any decision-making authority, it will 

be responsible for, inter alia, reviewing, at 

the request of the Board of Trustees or the 

Management Unit, certain reports, 

agreements, and documents related to the 

implementation of the Program in order to 

provide advice and input to MCAPhilippines regarding the implementation of 

the Program. 

(iii) Management Unit. 

(1) Composition. The management unit, 

which will be led by a competitively selected 

Managing Director, will be composed of 

competitively selected staff with expertise in 

the key components of the Program, 

including, without limitation, a KALAHI– 

CIDSS Project Director, a Secondary National 

Roads Development Director, a Revenue 

Administration Reform Director, as well as a 

Deputy Managing Director and other key 

Directors, including, without limitation, a 

Director for Finance, a Director for Legal/ 

General Counsel, a Director for Procurement, 


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a Director for Social and Environmental 

Assessment, and a Director for Monitoring 

and Evaluation, (the ‘‘Management Unit’’). 

The Management Unit will also include such 

other personnel as provided for in the MCAPhilippines Bylaws. The directors will be 

supported by appropriate additional staff to 

enable the Management Unit to execute its 

roles and responsibilities. 

(2) Roles and Responsibilities. The 

Management Unit will be based in Manila, 

the Philippines, and will be responsible for 

managing the day-to-day implementation of 

the Program, with oversight from the Board 

of Trustees. The Management Unit will serve 

as the principal link between MCC and the 

Government, and will be accountable for the 

successful execution of the Program, each 

Project, and each Activity. As a Government 

entity, MCA-Philippines will be subject to 

Government audit requirements. As a 

recipient of MCC Funding, MCA-Philippines 

will also be subject to MCC audit 

requirements. 

(d) Implementing Entities. 

Subject to the terms and conditions of this 

Compact and any other related agreements 

entered into in connection with this 

Compact, the Government and MCC have 

identified certain principal public 

institutions that may or will serve as 

implementing entities (each, an 

‘‘Implementing Entity’’), to implement and 

carry out certain Projects, Activities or 

components thereof in furtherance of this 

Compact. Any Implementing Entity will be 

subject to review and approval by MCC. The 

Government will ensure that the roles and 

responsibilities of each Implementing Entity 

and other appropriate terms are set forth in 

an agreement between MCA-Philippines and 

each Implementing Entity, which agreement 

must be in form and substance satisfactory to 

MCC (each an ‘‘Implementing Entity 

Agreement’’). 

(e) Fiscal Agent. 

Unless MCC otherwise agrees in writing, 

the Government, directly or through MCAPhilippines, will engage a fiscal agent (a 

‘‘Fiscal Agent’’), who will be responsible for 

assisting the Government with its fiscal 

management and ensure appropriate fiscal 

accountability of MCC Funding, and whose 

duties will include those set forth in the 

Program Implementation Agreement. 

(f) Procurement Agent. 

Unless MCC otherwise agrees in writing, 

the Government, directly or through MCAPhilippines, will engage one or more 

procurement agents (each, a ‘‘Procurement 

Agent’’) to carry out and certify specified 

procurement activities in furtherance of this 

Compact. The roles and responsibilities of 

each Procurement Agent will be set forth in 

the Program Implementation Agreement or 

such agreement as the Government, directly 

or through MCA-Philippines, enters into with 

each Procurement Agent, which agreement 

will be in form and substance satisfactory to 

MCC. Each Procurement Agent will adhere to 

the procurement standards set forth in the 

MCC Program Procurement Guidelines and 

ensure procurements are consistent with the 

procurement plan adopted by MCAPhilippines pursuant to the Program 

Implementation Agreement, unless MCC 

otherwise agrees in writing. 

Annex II Multi-Year Financial Plan 

Summary 

This Annex II summarizes the multi-year 

financial plan for the Program. 

1. General 

A multi-year financial plan summary 

(‘‘Multi-Year Financial Plan Summary’’) is set 

forth below. By such time as is specified in 

the Program Implementation Agreement, the 

Government will adopt, subject to MCC 

approval, a multi-year financial plan that 

includes, in addition to the multi-year 

summary of estimated MCC Funding, the 

annual and quarterly funding requirements 

for the Program (including administrative 

costs) and for each Project, projected both on 

a commitment and cash requirement basis. 

The Multi-Year Financial Plan Summary 

below does not include the contributions by 

the Government to the Program. 

MULTI-YEAR FINANCIAL PLAN SUMMARY

[Millions of US$] 

Project CIF Year 1 Year 2 Year 3 Year 4 Year 5 Total 

1. Revenue Administration Reform Project: 

(a) BIR Revenue Administration Reform Activity ......... 7.30 11.50 15.90 9.00 5.60 1.00 50.30 

(b) Revenue Integrity Protection Services (RIPS) Activity ........................................................................... ................ 0.50 3.35 0.15 ................ ................ 4.00 

Sub-Total ............................................................... 7.30 12.00 19.25 9.15 5.60 1.00 54.30 

2. KALAHI–CIDSS: 

(a) Capacity Building and Implementing Support ......... ................ 4.91 2.84 1.48 1.11 0.28 10.62 

(b) Grants for Community Projects ............................... ................ 1.82 20.43 17.99 30.81 24.46 95.51 

(c) Project Management ............................................... 2.31 3.06 2.31 1.93 1.87 2.39 13.87 

Sub-Total ............................................................... 2.31 9.79 25.58 21.40 33.79 27.13 120.00 

3. Secondary National Roads Development Program: 

(a) Samar road ............................................................. 5.66 6.61 36.01 54.38 57.30 40.22 200.18 

(b) Environmental and Social Mitigation ....................... 5.09 6.53 0.82 0.87 0.95 ................ 14.26 

Sub-Total ............................................................... 10.75 13.14 36.83 55.25 58.25 40.22 214.44 

4. Monitoring and Evaluation: 

Monitoring and Evaluation ............................................ 0.24 2.13 1.44 1.13 1.59 1.73 8.26 

Sub-Total ............................................................... 0.24 2.13 1.44 1.13 1.59 1.73 8.26 

5. Compact Administration & Oversight: 

(a) Program Administration ........................................... 4.46 3.24 3.28 3.33 3.42 3.38 21.11 

(b) Program Audits ....................................................... ................ 0.36 0.46 0.46 0.46 0.46 2.20 

(c) Fiscal Agent ............................................................. ................ 1.50 1.50 1.50 1.50 1.50 7.50 

(d) Procurement Agent ................................................. ................ 1.40 1.40 1.10 1.10 1.10 6.10 

Sub-Total—Compact Administration & Audit ........ 4.46 6.50 6.64 6.39 6.48 6.44 36.91 

Total Estimated MCC Contribution ................ 25.06 43.56 89.74 93.32 105.71 76.52 433.91 


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4As the municipalities are due to be randomly 

selected, baseline figures are not yet known. 5These figures are indicative. 

6The baseline levels for these indicators will be 

determined by the initial round of data collection 

in the selected municipalities. The targets will be 

informed by this information and by the results of 

the endline data collection in KC1 areas. 

7The precise indicators, definitions, baseline 

level and final targets will be determined by the 

initial round of data collection in the selected 

control and treatment municipalities. The targets 

will be informed by this information and by the 

results of the endline data collection in KC1 areas. 

Annex III Description of the Monitoring and 

Evaluation Plan 

This Annex III (this ‘‘M&E Annex’’) 

generally describes the components of the 

Monitoring and Evaluation Plan (‘‘M&E 

Plan’’) for the Program. The actual content 

and form of the M&E Plan will be agreed to 

by MCC and the Government in accordance 

with the Program Implementation 

Agreement. The M&E Plan may be modified 

from time to time with MCC approval 

without requiring an amendment to this 

Annex III. 

1. Overview 

MCC and the Government will formulate 

and agree to, and the Government will 

implement, or cause to be implemented, an 

M&E Plan that specifies (a) how progress 

toward the Compact Goal, Program Objective 

and Project Objectives will be monitored 

(‘‘Monitoring Component’’), (b) a process and 

timeline for the monitoring of planned, 

ongoing, or completed 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, evaluation, and 

other reports, will be made publicly available 

on the Web site of MCA-Philippines and 

elsewhere. 

2. Program Logic 

The M&E Plan will be built on a logic 

model which illustrates how the Program, 

Projects and Activities contribute to the 

Compact Goal, the Program Objective and the 

Project Objectives. The goal of this Compact 

is to reduce poverty through economic 

growth. The Program Objective is to (a) 

increase the incomes of Filipinos through the 

benefits of community-driven sub-projects, 

(b) obtain time savings and lower 

transportation costs for road users in Program 

areas, and (c) increase investment and 

government expenditure due to an increase 

in tax revenue and a reduction in corruption. 

The corresponding Project Objectives are: 

(a) The KALAHI–CIDSS Project expects to 

improve the responsiveness of local 

governments to community needs, encourage 

communities to engage in development 

activities and deliver benefits to barangay 

residents through the individual sub-projects. 

(b) The Secondary National Roads 

Development Project expects to lower vehicle 

operating costs and save the time of those 

Filipinos living near the roads. 

(c) The Revenue Administration Reform 

Project expects to increase tax revenues over 

time and support the Department of 

Finance’s initiatives to detect and deter 

corruption within its revenue agencies. 

3. Monitoring Component 

To monitor progress toward the 

achievement of the desired impact and 

outcomes of the Compact, the Monitoring 

Component of the M&E Plan will identify (a) 

the Indicators (as defined below), (b) the 

definitions of the Indicators, (c) the sources 

and methods for data collection, (d) the 

frequency for data collection, (e) the party or 

parties responsible, and (f) the timeline for 

reporting on each Indicator to MCC. 

Further, the Monitoring Component will 

track changes in the selected Indicators as a 

means for measuring progress towards the 

achievement of the objectives during the 

Compact Term. The M&E Plan will establish 

baselines which measure the situation prior 

to a development intervention, against which 

progress can be assessed or comparisons 

made (including evaluations and special 

studies) (each, a ‘‘Baseline’’). MCAPhilippines will collect Baselines on the 

selected Indicators or verify already collected 

Baselines where applicable and as set forth 

in the M&E Plan. 

(a) Indicators. The M&E Plan will measure 

the results of the Program using quantitative, 

objective and reliable data (‘‘Indicators’’). 

Each Indicator will have benchmarks that 

specify the expected value and the expected 

time by which that result will be achieved 

(‘‘Target’’). The M&E Plan will be prepared in 

accordance with the MCC Policy for 

Monitoring and Evaluation of Compacts and 

Threshold Programs. All Indicators will be 

disaggregated by gender, income level and 

age, and beneficiary types to the extent 

practicable. Subject to prior written approval 

from MCC, MCA-Philippines may add 

Indicators or refine the definitions and 

Targets of existing Indicators. 

(i) Compact Indicators. 

(1) Goal. The M&E Plan will contain the 

following Indicators related to the Compact 

Goal. These Indicators of national goals are 

specified in the ‘‘Medium-Term Philippine 

Development Plan’’ to which the Projects 

contributes, but are not solely attributable to 

the Projects: 

(A) Annual growth in Gross National 

Product. 

(B) Percent of households living below the 

subsistence poverty line. 

(2) Other Indicators. The M&E Plan will 

contain the Indicators listed in the following 

tables. 

TABLE 1—M&E INDICATORS FOR KALAHI–CIDSS PROJECT

Result Indicator Definition of indicator Baseline 4 Year 5 5

Objective Level 

Increased responsiveness of Local 

Government Units (LGUs) to community needs.

Use of inclusive Community Driven 

Development (CDD) processes by 

local governments.

Percentage of project municipal local 

government units (MLGUs) that 

have meetings with community 

representatives to solicit inputs to 

municipal development plans and/ 

or percentage of barangays that 

reflect community priorities in their 

barangay development plans.

TBD 80% 

LGU provision of funds for O&M ...... Percentage of MLGUs that provide 

funding support for KALAHI– 

CIDSS sub-project O&M.

0% 80% 

LGU application of CDD practices to 

non-KALAHI–CIDSS activities.

Number of project MLGUs that pass 

ordinances/resolutions adopting 

CDD principles.

TBD TBD 

Increased community engagement in 

development activities.

Participation of women in local government.Number of women representatives in 

targeted areas.

TBD TBD 

Community engagement in development activities.Percentage of MCC-funded 

KALAHI–CIDSS-developed community organizations that have 

satisfactory organizational performance ratings.

0% 80% 


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TABLE 1—M&E INDICATORS FOR KALAHI–CIDSS PROJECT—Continued 

Result Indicator Definition of indicator Baseline 4 Year 5 5

Percentage of communities that attract additional funding for development activities after the 

KALAHI–CIDSS Project is completed.

0% 30% 

Increased value of sub-project benefits 6.Aggregate value of benefits of subprojects..(Varies, please see below) ............... .................... ....................

Outcome Level 

Increased LGU engagement ............. LGU provision of funds ..................... Percentage of LGUs that provide at 

least 80% of Memorandum of 

Agreement (MOA) funding requirements.

0% 90% 

LGU provision of technical support .. Percentage of LGUs that provide at 

least 80% of MOA technical support requirements.

0% 90% 

Increased community engagement ... Barangay assembly participation ..... Percentage of barangay assemblies 

with 80% of community households represented.

TBD 80% 

Marginalized group participation ...... Percentage of barangay assemblies 

with 65% of youth, women, indigenous people and poorest households represented.

TBD 80% 

Increased value of sub-project benefits 7.Time savings .................................... ........................................................... TBD TBD 

Labor force participation (by age and 

gender).

........................................................... TBD TBD 

School enrollment ............................. ........................................................... TBD TBD 

Number of beneficiary farming 

households.

........................................................... TBD TBD 

Yield of paddy rice ............................ ........................................................... TBD TBD 

Water consumption (by use) ............ ........................................................... TBD TBD 

Use of barangay health facilities ...... ........................................................... TBD TBD 

Post-harvest losses .......................... ........................................................... TBD TBD 

Output Level 

Sub-projects delivered ...................... Sub-projects completed .................... Number of completed sub-projects 

(by type).

0 3400 

Sub-projects sustained ...................... Sub-projects sustained ..................... Percentage of sub-projects that pass 

functionality audits or receive satisfactory or higher ratings of sustainability.

0% 80% 

TABLE 2—M&E INDICATORS FOR SECONDARY NATIONAL ROADS DEVELOPMENT PROJECT

Result Indicator Definition of indicator Road Baseline Year 5 Year 20 

Objective Level 

Net incomes of road 

users increased.

Costs to road users ....... Aggregate value of time 

savings (in 

2009US$m) 8.

Wright-Taft- BoronganGuiuan.NA 5.2 9.5 

Change in aggregate vehicle operating cost (in 

2009US$m) 9.

Wright-Taft- BoronganGuiuan.NA 9.4 16.5 

Outcome Level 

Improved road quality ..... Roughness ..................... International Roughness 

Index of the road segments supported by 

the Compact.

Wright-Taft- BoronganGuiuan.

10 7.1 1.8 5.8 

Increased vehicle activity Average Annual Daily 

Traffic (AADT).

AADT on the road segments supported by 

the Compact.

Wright-Taft- BoronganGuiuan.1,179 1,450 2,720 

Lower maintenance costs Maintenance savings ..... Reduction in annual 

maintenance spending 

(in 2009US$m) 11.

Wright-Taft- BoronganGuiuan.NA 0.4 0.3 


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TABLE 2—M&E INDICATORS FOR SECONDARY NATIONAL ROADS DEVELOPMENT PROJECT—Continued 

Result Indicator Definition of indicator Road Baseline Year 5 Year 20 

Output Level 

Roads rehabilitated or 

built.

Total length .................... KM of road sections 

completed—rehabilitated.

Wright-Taft- BoronganGuiuan.0 222 222 

TABLE 3—M&E INDICATORS FOR REVENUE ADMINISTRATION REFORM PROJECT

Result Indicator Definition of indicator Baseline Year 5 

Project-wide Indicators 

Objective Level 

Increased tax revenues over time ....... Tax gap .............................................. Percentage of tax potential that is

actually collected (VAT only).

12TBD TBD 

Decreased incidence of corrupt activities within Department of Finance 

(DOF).

Perceptions of corruption .................. DOF staff and the general public’s 

perceptions that DOF staff are engaged in corrupt activities.

TBD TBD 

Perceptions that DOF is taking action 

to fight corruption.

TBD TBD 

eTIS sub-Activity 

Outcome Level 

Increased number of returns ............... Number of returns filed ...................... Number of tax returns filed by individuals and corporate business at 

BIR Revenue District Offices that 

have implemented eTIS.

TBD TBD 

Corruption perceptions ........................ Perceptions of change in incidence 

of corruption among BIR employees.

Perceptions of corruption as specifically related to eTIS implementation e.g. use of electronic audit.TBD TBD 

Efficiency perceptions ......................... Perceptions of organizational efficiency among BIR employees.Perceptions of efficiency as specifically related to eTIS implementation.TBD TBD 

Output Level 

Increased number of automaticallygenerated audits.Number of audits ............................... Automatically-generated (by eTIS) 

audits broken down by large taxpayer unit and RDOs that have implemented eTIS.

0 TBD 

Automated Audit Tools (AATs) sub-Activity 

Outcome Level 

Increased revenue ............................... Revenue collection per audit ............. Average collection per firm using 

Automated Audit Tools AATs (in 

pesos).

2,500,000 4,300,000 

Output Level 

Decreased time to complete an audit Time to complete an audit ................. Calendar days from start of audit to 

completion.

117 44 

Increased percentage of audits using 

AATS.

Percentage of audit cases performed 

using AATS.

Large taxpayer unit audit cases performed using only AATS.2.9% 100% 

Reduced opportunities for discretion .. Time spent at taxpayer premises per 

audit.

Hours to perform all audit functions 

needed at taxpayer premises.

335 50 

Public Awareness Campaign sub-Activity 

Outcome Level 

Increased revenue ............................... Revenue from target group ............... Target group to be defined based on 

project type.

TBD TBD 

Increased satisfaction .......................... Taxpayer satisfaction with BIR services.Improvement in customer satisfaction 

survey scores.

TBD TBD 


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8These indicators are defined as the actual cost 

or spending minus what they were estimated to be 

in the without project scenario, as calculated by the 

model of the feasibility study. 

9These indicators are defined as the actual cost 

or spending minus what they were estimated to be 

in the without project scenario, as calculated by the 

Highway Development and Management 4 model 

used by the feasibility study. These indicators will 

not be measured directly in year 5 of the Compact. 

Instead they will be recalculated using the same 

model, based on actual data on traffic, roughness, 

and maintenance spending (see below). 

10This baseline is a visual estimation, not an 

International Roughness Index measure. 

11These indicators are defined as the actual cost 

or spending minus what they were estimated to be 

in the without project scenario, as calculated by the 

model of the feasibility study. 

12There have been several calculations of the 

VAT tax gap in the last 15 years and these have 

produced a wide range of estimates depending on 

the methodology employed. We are aware of no 

more recent estimate by the IMF than 1999, when 

it was estimated at 50%. The IMF will be 

responsible for producing a more current baseline 

figure for the tax gap indicator. 

TABLE 3—M&E INDICATORS FOR REVENUE ADMINISTRATION REFORM PROJECT—Continued 

Result Indicator Definition of indicator Baseline Year 5 

Increased awareness .......................... Perception of change based on specific message.Awareness of the campaign, the 

available BIR services and/or taxpayer obligations.

TBD TBD 

RIPS Activity 

Outcome Level 

Increased number of resolved cases .. Number of ‘‘successful’’ case resolutions (cumulative).Number of personnel charged by 

RIPS who are then suspended, 

dismissed or convicted.

28 140 

Corruption perceptions ........................ Perceptions of corrupt activities within DOF agencies.Perceptions among DOF staff and 

the general public.

TBD TBD 

Output Level 

Increased number of investigations .... Number of complaints investigated 

(cumulative).

Number of cases opened .................. 110 400 

Decreased time to complete an investigation.Time taken to complete investigation 

(average).

Days from case opened to resolution 120 60 

Increased number of DOF personnel 

charged.

Personnel charged (cumulative) ........ Number of DOF personnel charged 

with either graft or corruption.

67 500 

Note: Many of these indicators are in draft form as the development of a full set of indicators, baselines and targets is proposed as part of the 

eTIS sub-Activity and the Public Awareness Campaign sub-Activity. For indicators of perceptions of corruption, a baseline survey will be developed and conducted as soon as possible and the indicators and corresponding targets will be developed for relevant sub-Activities at that time. 

(b) Data Collection and Reporting. The 

M&E Plan will establish guidelines for data 

collection and reporting, and identify the 

responsible parties. Compliance with data 

collection and reporting timelines will be 

conditions for Disbursements for the relevant 

Activities as set forth in the Program 

Implementation Agreement. The M&E Plan 

will specify the data collection 

methodologies, procedures, and analysis 

required for reporting on results at all levels. 

The M&E Plan will describe any interim MCC 

approvals for data collection, analysis, and 

reporting plans. 

(c) Data Quality Reviews. As determined in 

the M&E Plan or as otherwise requested by 

MCC, the quality of the data gathered through 

the M&E Plan will be reviewed to ensure that 

data reported are as valid, reliable, and 

timely as resources will allow. The objective 

of any data quality review will be to verify 

the quality and the consistency of 

performance data across different 

implementation units and reporting 

institutions. Such data quality reviews also 

will serve to identify where those levels of 

quality are not possible, given the realities of 

data collection. 

(d) Management Information System. The 

M&E Plan will describe the information 

system that will be used to collect data, store, 

process and deliver information to relevant 

stakeholders in such a way that the Program 

information collected and verified pursuant 

to the M&E Plan is at all times accessible and 

useful to those who wish to use it. The 

system development will take into 

consideration the requirement and data 

needs of the components of the Program, and 

will be aligned with existing MCC systems, 

other service providers, and relevant 

Implementing Entities. 

(e) Role of MCA-Philippines. The 

monitoring and evaluation of this Compact 

spans discrete Projects and will involve a 

variety of governmental, non-governmental, 

and private sector institutions. Subject to 

Section 3.2(b) of the Compact, MCAPhilippines is responsible for 

implementation of the M&E Plan. MCAPhilippines will oversee all Compact-related 

monitoring and evaluation activities 

conducted for each of the Projects, ensuring 

that data from all implementing entities is 

consistent, accurately reported and 

aggregated into regular Compact performance 

reports as described in the M&E Plan. 

4. Evaluation Component 

The evaluation component of the M&E 

Plan will contain three types of evaluations: 

(a) Impact evaluations; (b) final evaluations; 

and (c) special studies. The evaluation 

component of the M&E Plan will describe the 

purpose of the evaluation, methodology, 

timeline, required MCC approvals, and the 

process for collection and analysis of data for 

each evaluation. The results of all 

evaluations will be made publicly available 

in accordance with MCC’s guidelines for 

monitoring and evaluation plans posted from 

time to time on the MCC Web site (the ‘‘MCC 

Policy for Monitoring and Evaluation of 

Compacts and Threshold Programs’’). 

(a) Impact Evaluation. The M&E Plan will 

include a description of the methods to be 

used for impact evaluations and plans for 

integrating the evaluation method into 

Project design. Based on in-country 

consultation with stakeholders, the strategies 

outlined below were jointly determined as 

having the strongest potential for rigorous 

impact evaluation. The M&E Plan will further 

outline in detail these methodologies. Final 

impact evaluation strategies are to be 

included in the M&E Plan. The following is 

a summary of the current impact evaluation 

methodology: 

(i) KALAHI–CIDSS Project. 

The planned impact evaluation will cover 

new municipalities across both MCCsupported and World Bank-supported areas. 

Although the final design and 

implementation of the impact evaluation will 

be contracted to an independent consultant 

firm, a joint advisory board, with members 

from MCC, MCA-Philippines, the World 

Bank, DSWD, the National Economic 

Development Agency, and local academics 

will oversee the impact evaluation, which 

will be made publically available upon 

completion. 

MCC and the World Bank cannot provide 

sufficient funding for all eligible 

municipalities. Thus the proposed approach 

will randomly select some pairs of 

municipalities to serve as treatment and 

controls from the eligible list. The specific 

municipalities will be randomly selected 


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from that list by an independent party. 

Several of the Government’s obligations are 

related to the methodology and 

implementation of this Impact Evaluation. 

Key Impact Evaluation questions will 

include: How does receiving KALAHI–CIDSS 

support (from either the KALAHI–CIDSS 

Project or KC1) influence individual and 

community measures of: 

(1) Social capital (participation in 

meetings, membership in groups, trust, etc); 

(2) Welfare (consumption expenditure, 

labor force participation (including for 

women), hours on household production, 

enrollment, etc.); and 

(3) The link between social capital and 

welfare (operations and maintenance 

practices, sustainability, project costs, 

congruence of preferences with sub-projects 

selected, etc.). 

(ii) Secondary National Roads 

Development Project. 

A rigorous impact evaluation is not 

currently planned for the Secondary National 

Roads Development Project due to the 

lengthy time of construction and the 

corresponding time required for the economy 

to adapt to the improvement. 

(b) Final Evaluation. The M&E Plan will 

make provision for final Project level 

evaluations (‘‘Final Evaluations’’). With the 

prior written approval of MCC, MCAPhilippines will engage independent 

evaluators to conduct the Final Evaluations 

at the end of each Project. The Final 

Evaluations will review progress during 

Compact implementation and provide a 

qualitative context for interpreting 

monitoring data and impact evaluation 

findings. They must at a minimum (i) 

evaluate the efficiency and effectiveness of 

the Activities, (ii) determine if and analyze 

the reasons why the Compact Goal, Program 

Objective and Project Objective(s), 

outcome(s) and output(s) were or were not 

achieved, (iii) identify positive and negative 

unintended results of the Program, (iv) 

provide lessons learned that may be applied 

to similar projects, and (v) assess the 

likelihood that results will be sustained over 

time. 

(c) Special Studies. The M&E Plan will 

include a description of the methods to be 

used for special studies, as necessary, funded 

through this Compact or by MCC. Plans for 

conducting the special studies will be 

determined jointly between MCA-Philippines 

and MCC before the approval of the M&E 

Plan. The M&E Plan will identify and make 

provision for any other special studies, ad 

hoc evaluations, and research that may be 

needed as part of the monitoring and 

evaluating of this Compact. Either MCC or 

MCA-Philippines may request special studies 

or ad hoc evaluations of Projects, Activities, 

or the Program as a whole prior to the 

expiration of the Compact Term. When MCAPhilippines engages an evaluator, the 

engagement will be subject to the prior 

written approval of MCC. Contract terms 

must ensure non-biased results and the 

publication of results. 

As of the date hereof, two special studies 

are planned: For the KALAHI–CIDSS Project, 

an evaluation is planned to measure the 

various benefits of the sub-projects; for the 

Secondary National Roads Development 

Project, evaluations are planned to focus on 

measuring changes in travel times and 

transportation costs. 

(i) Request for Ad Hoc Evaluation or 

Special Study. If MCA-Philippines requires 

an ad hoc independent evaluation or special 

study at the request of the Government for 

any reason, including for the purpose of 

contesting an MCC determination with 

respect to a Project or Activity or to seek 

funding from other donors, no MCC Funding 

or MCA-Philippines resources may be 

applied to such evaluation or special study 

without MCC’s prior written approval. 

5. Other Components of the M&E Plan 

In addition to the monitoring and 

evaluation components, the M&E Plan will 

include the following components for the 

Program, Projects and Activities, including, 

where appropriate, roles and responsibilities 

of the relevant parties and providers: 

(a) Costs. A detailed cost estimate for all 

components of the M&E Plan; and 

(b) Assumptions and Risks. Any 

assumption or risk external to the Program 

that underlies the accomplishment of the 

Program Objective, Project Objectives and 

Activity outcomes and outputs. However, 

such assumptions and risks will not excuse 

any Party’s performance unless otherwise 

expressly agreed to in writing by the Parties. 

6. Approval and Implementation of the M&E 

Plan 

The approval and implementation of the 

M&E Plan, as amended from time to time, 

will be in accordance with the Program 

Implementation Agreement and any other 

relevant supplemental agreement, and the 

MCC Policy for Monitoring and Evaluation of 

Compacts and Threshold Programs. 

Annex IV Conditions to Disbursement of 

Compact Implementation Funding 

This Annex IV sets forth the conditions 

precedent applicable to Disbursements of 

Compact Implementation Funding (each a 

‘‘CIF Disbursement’’). Capitalized terms used 

in this Annex IV and not defined in this 

Annex IV or in the Compact have the 

meanings assigned to such terms in the 

Program Implementation Agreement. 

1. Conditions to the Initial CIF Disbursement 

Each of the following conditions precedent 

must have been met to MCC’s satisfaction 

prior to the initial CIF Disbursement: 

(a) MCA-Philippines will have delivered to 

MCC a complete, correct, and fully executed 

Disbursement Request for the relevant 

Disbursement Period, in form and substance 

satisfactory to MCC and submitted in 

accordance with the Reporting Guidelines. 

Each Disbursement Request will include the 

following reference number: GR10PHL10010. 

(b)(i) Each Activity being funded by such 

CIF Disbursement will facilitate 

implementation of the Compact, (ii) there has 

been no violation of, and the use of the 

requested funds for the purposes requested 

will not violate, the limitations on the use or 

treatment of (1) MCC Funding, as set forth in 

this Compact, including under Section 2.7, or 

(2) Compact Implementation Funding, and 

(iii) no material breach of any covenant, 

obligation, or responsibility of the 

Government or MCA-Philippines under this 

Compact, the Program Implementation 

Agreement, any supplemental agreement, or 

any Program Guidelines has occurred or is 

continuing. 

(c) The Government will have published 

the Establishment Decree, and such decree 

will remain in full force and effect, without 

modification, alteration, rescission, or 

suspension of any kind unless otherwise 

agreed by MCC. Without limitation of the 

foregoing, MCA-Philippines will have 

delivered to MCC (i) evidence of the adoption 

and publication of the Establishment Decree, 

and (ii) an up-to-date extract from the state 

registry verifying that MCA-Philippines is a 

fully-formed and registered public institution 

under the laws of the Philippines. 

(d) MCA-Philippines will be sufficiently 

mobilized in order for MCA-Philippines to be 

able to fully perform its obligations and to act 

on behalf of the Government. 

(e) MCA-Philippines will have adopted a 

Procurement Plan, in form and substance 

satisfactory to MCC, with respect to the 

Compact Implementation Funding, and such 

Procurement Plan remains in full force and 

effect. 

(f) MCA-Philippines will have adopted a 

Fiscal Accountability Plan, in form and 

substance satisfactory to MCC, and such 

Fiscal Accountability Plan remains in full 

force and effect. 

(g) The Government will have adopted and 

published such decrees and regulations as 

necessary to implement the tax assumption 

mechanisms set forth in the Program 

Implementation Agreement, and such 

decrees and regulations will remain in full 

force and effect without modification, 

alteration, rescission, or suspension of any 

kind, unless otherwise agreed by MCC. 

(h) The Fiscal Agent will have been duly 

appointed, and MCA-Philippines will have 

duly executed the Fiscal Agent Agreement, 

and such agreement will be in full force and 

effect without modification, alteration, 

rescission, or suspension of any kind, unless 

otherwise agreed by MCC, and no material 

breach has occurred or is continuing 

thereunder. 

(i) The Procurement Agent will have been 

duly appointed, and MCA-Philippines will 

have duly executed an agreement with the 

Procurement Agent, and such agreement will 

be in full force and effect without 

modification, alteration, rescission, or 

suspension of any kind, unless otherwise 

agreed by MCC, and no material breach has 

occurred or is continuing thereunder. 

(j) The Bank will have been duly 

appointed, and MCA-Philippines and the 

Fiscal Agent will have duly executed the 

Bank Agreement, and such agreement will be 

in full force and effect without modification, 

alteration, rescission, or suspension of any 

kind, unless otherwise agreed by MCC, and 

no material breach has occurred or is 

continuing thereunder. 

(k) The Permitted Account will be 

established. 

(l) Prior to the deployment of the resident 

tax administration technical assistance lead 

advisor, the IMF resident advisor will be 

designated as a senior advisor to the head of 


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Federal Register / Vol. 75, No. 191 / Monday, October 4, 2010 / Notices 61215 

the BIR’s Project Implementation & 

Monitoring Office. Said resident advisor will 

coordinate all tax administration-related 

technical assistance from all donors. 

2. Conditions to Each CIF Disbursement 

Each of the following conditions precedent 

must have been met to MCC’s satisfaction 

prior to the applicable CIF Disbursement: 

(a) MCA-Philippines will have delivered to 

MCC a complete, correct, and fully executed 

Disbursement Request for the relevant 

Disbursement Period, together with any 

applicable Periodic Reports covering such 

Disbursement Period, in each case in form 

and substance satisfactory to MCC and 

submitted in accordance with the Reporting 

Guidelines. Each Disbursement Request will 

include the following reference number: 

GR10PHL10010. 

(b)(i) Each Activity being funded by such 

CIF Disbursement will facilitate 

implementation of the Compact, (ii) there has 

been no violation of, and the use of the 

requested funds for the purposes requested 

will not violate, the limitations on the use or 

treatment of (1) MCC Funding, as set forth in 

this Compact, including under Section 2.7, or 

(2) Compact Implementation Funding, (iii) no 

material breach of any covenant, obligation, 

or responsibility of the Government or MCAPhilippines under this Compact, the Program 

Implementation Agreement, any 

supplemental agreement, or any Program 

Guidelines has occurred or is continuing, and 

(iv) any Taxes and Contributions paid with 

MCC Funding prior to or on the date ninety 

(90) days prior to the start of the applicable 

Disbursement Period have been assumed by 

the Government in full in accordance with 

this Compact. 

(c) The MCA-Philippines Procurement 

Plan will be in full force and effect. 

(d) The MCA-Philippines Fiscal 

Accountability Plan will be in full force and 

effect. 

(e) Each of the Fiscal Agent Agreement, the 

MCA-Philippines agreement with the 

Procurement Agent, and the Bank Agreement 

will be in full force and effect without 

modification, alteration, rescission, or 

suspension of any kind, unless otherwise 

agreed by MCC, and no material breach has 

occurred or is continuing thereunder. 

(f) The Permitted Account will be in 

existence. 

(g) The tax assumption mechanism set 

forth in the Program Implementation 

Agreement will be in full force and effect. 

Annex V Definitions 

Activity has the meaning provided in Part 

B of Annex I. 

Additional Representative has the meaning 

provided in Section 4.2. 

Audit Guidelines has the meaning 

provided in Section 3.8(a). 

Baseline has the meaning provided in 

paragraph 3 of Annex III. 

BIR has the meaning provided in paragraph 

3(a) of Part B of Annex I. 

Board of Trustees has the meaning 

provided in paragraph 4(c)(i)(1) of Part B of 

Annex I. 

CIF Disbursement has the meaning 

provided in Annex IV. 

Compact has the meaning provided in the 

Preamble. 

Compact Goal has the meaning provided in 

Section 1.1. 

Compact Implementation Funding has the 

meaning provided in Section 2.2(a). 

Compact Records has the meaning 

provided in Section 3.7(a). 

Compact Term has the meaning provided 

in Section 7.3. 

Covered Provider has the meaning 

provided in Section 3.7(c). 

Disbursement has the meaning provided in 

Section 2.4. 

DSWD has the meaning provided in 

Section 8.1(a)(i). 

Establishment Decree has the meaning 

provided in Section 3.2(b). 

eTIS has the meaning provided in 

paragraph 3(b) of Part B of Annex I. 

Evaluation Component has the meaning 

provided in paragraph 1 of Annex III. 

Excess CIF Amount has the meaning 

provided in Section 2.2(d). 

Final Evaluations has the meaning 

provided in paragraph 4(b) of Annex III. 

Fiscal Agent has the meaning provided in 

paragraph 4(e) of Part B of Annex I. 

Governance Guidelines has the meaning 

provided in paragraph 4(c) of Part B of Annex 

I. 

Government has the meaning provided in 

the Preamble. 

IMF has the meaning provided in 

paragraph 3(b)(i)(1) of Part B of 

Annex I. 

Implementation Letter has the meaning 

provided in Section 3.5. 

Implementing Entity has the meaning 

provided paragraph 4(d) of Part B of 

Annex I. 

Implementing Entity Agreement has the 

meaning provided in paragraph 4(d) of Part 

B of Annex I. 

Indicators has the meaning provided in 

paragraph 3(a) of Annex III. 

Inspector General has the meaning 

provided in Section 3.8(a). 

KALAHI–CIDSS has the meaning provided 

in paragraph 1(a) of Part B of Annex I. 

KALAHI–CIDSS Project has the meaning 

provided in paragraph 1(a) of Part B of Annex 

I. 

KC1 has the meaning provided in 

paragraph 1(a) of Part B of Annex I. 

M&E Annex has the meaning provided in 

Annex III. 

M&E Plan has the meaning provided in 

Annex III. 

Management Unit has the meaning 

provided in paragraph 4(c)(iii)(1) of Part B of 

Annex I. 

MCA Act has the meaning provided in 

Section 2.2(a). 

MCA-Philippines has the meaning 

provided in Section 3.2(b). 

MCA-Philippines Bylaws has the meaning 

provided in paragraph 4(c) of Part B of Annex 

I. 

MCC has the meaning provided in the 

Preamble. 

MCC Environmental Guidelines has the 

meaning provided in Section 2.7(c). 

MCC Funding has the meaning provided in 

Section 2.3. 

MCC Policy for Monitoring and Evaluation 

of Compacts and Threshold Programs has the 

meaning provided for in paragraph 4 of 

Annex III. 

MCC Program Procurement Guidelines has 

the meaning provided in Section 3.6. 

MCC Web site has the meaning provided in 

Section 2.7. 

Monitoring Component has the meaning 

provided in paragraph 1 of Annex III. 

Multi-Year Financial Plan Summary has 

the meaning provided in paragraph 1 of 

Annex II. 

OP 4.12 has the meaning provided in 

paragraph 3 of Part A of Annex I. 

Party and Parties has the meaning 

provided in the Preamble. 

Permitted Account has the meaning 

provided in Section 2.4. 

The Philippines has the meaning provided 

in the Preamble. 

Principal Representative has the meaning 

provided in Section 4.2. 

Procurement Agent has the meaning 

provided in paragraph 4(f) of Part B of Annex 

I. 

Program has the meaning provided in the 

Preamble. 

Program Assets include MCC Funding, 

interest accrued thereon, and any assets, 

goods or property (real, tangible or 

intangible) purchased or financed in whole 

or in part (directly or indirectly) by MCC 

Funding. 

Program Funding has the meaning 

provided in Section 2.1. 

Program Guidelines means collectively the 

Audit Guidelines, the MCC Environmental 

Guidelines, the Governance Guidelines, the 

MCC Program Procurement Guidelines, the 

Reporting Guidelines, the MCC Policy for 

Monitoring and Evaluation of Compacts and 

Threshold Programs, and any other 

guidelines, policies or guidance papers from 

time to time published on the MCC Web site. 

Program Implementation Agreement or PIA 

has the meaning provided in Section 3.1. 

Program Objective has the meaning 

provided in Section 1.2. 

Project(s) has the meaning provided in 

Section 6.2(b). 

Project Objective(s) has the meaning 

provided in Section 1.3. 

Provider has the meaning provided in 

Section 3.7(c). 

Reporting Guidelines means the MCC 

‘‘Guidance on Quarterly MCA Disbursement 

Request and Reporting Package’’ posted by 

MCC on the MCC Web site or otherwise 

publicly made available. 

Revenue Administration Reform Project 

has the meaning provided in paragraph 3(b) 

of Part B of Annex I. 

RIPS has the meaning provided in 

paragraph 3(b) of Part B of Annex I. 

Secondary National Roads Development 

Project has the meaning provided in 

paragraph 2(b) of Part B of Annex I. 

Stakeholders’ Committee has the meaning 

provided in paragraph 4(c)(ii)(1) of Part B of 

Annex I. 

Target has the meaning provided in 

paragraph 3(a) of Annex III. 

Taxes and Contributions has the meaning 

provided in Section 2.8. 

United States Dollars or US$ means the 

lawful currency of the United States of 

America. 


jlentini on DSKJ8SOYB1PROD with NOTICES
61216 Federal Register / Vol. 75, No. 191 / Monday, October 4, 2010 / Notices 

USAID has the meaning provided in 

paragraph 1(e) of Part B of Annex I. 

[FR Doc. 2010–24820 Filed 10–1–10; 8:45 am] 

BILLING CODE 9211–03–P 

MILLENNIUM CHALLENGE 

CORPORATION 

[MCC FR 10–12] 

Report on the Selection of Eligible 

Countries for Fiscal Year 2011 

AGENCY: Millennium Challenge 

Corporation. 

ACTION: Notice. 

SUMMARY: This report is provided in 

accordance with section 608(d)(1) of the 

Millennium Challenge Act of 2003, 

Public Law 108–199, Division D, (the 

‘‘Act’’), 22 U.S.C. 7708(d)(1). 

Dated: September 28, 2010. 

Melvin F. Williams, Jr., 

VP/General Counsel and Corporate Secretary, 

Millennium Challenge Corporation. 

Report on the Criteria and Methodology 

for Determining the Eligibility of 

Candidate Countries for Millennium 

Challenge Account Assistance for Fiscal 

Year 2011 

This report to Congress is provided in 

accordance with section 608(b) of the 

Millennium Challenge Act of 2003, as 

amended, 22 U.S.C. 7707(b) (the ‘‘Act’’). 

The Act authorizes the provision of 

Millennium Challenge Account (MCA) 

assistance to countries that enter into a 

Millennium Challenge Compact with 

the United States to support policies 

and programs that advance the 

prospects of such countries achieving 

lasting economic growth and poverty 

reduction. The Act requires the 

Millennium Challenge Corporation 

(MCC) to take a number of steps in 

determining what countries will be 

selected as eligible for MCA compact 

assistance for fiscal year 2011 (FY11) 

based on the countries’ demonstrated 

commitment to just and democratic 

governance, economic freedom, and 

investing in their people, as well as 

MCC’s opportunity to reduce poverty 

and generate economic growth in the 

country. These steps include the 

submission of reports to the 

congressional committees specified in 

the Act and publication of notices in the 

Federal Register that identify: 

The countries that are ‘‘candidate 

countries’’ for MCA assistance for FY11 

based on their per capita income levels 

and their eligibility to receive assistance 

under U.S. law. This report also 

identifies countries that would be 

candidate countries but for specified 

legal prohibitions on assistance (section 

608(a) of the Act; 22 U.S.C. 7707(a)); 

The criteria and methodology that 

MCC’s Board of Directors (Board) will 

use to measure and evaluate the policy 

performance of the candidate countries 

consistent with the requirements of 

section 607 of the Act (22 U.S.C. 7706) 

in order to determine ‘‘MCA eligible 

countries’’ from among the ‘‘candidate 

countries’’ (section 608(b) of the Act); 

and 

The list of countries determined by 

the Board to be ‘‘MCA eligible countries’’ 

for FY11, with justification for 

eligibility determination and selection 

for compact negotiation, including with 

which of the MCA eligible countries the 

Board will seek to enter into MCA 

compacts (section 608(d) of the Act). 

This report is the second of the three 

required reports listed above. 

Criteria and Methodology for FY11 

The Board will base its selection of 

eligible countries on several factors 

including: 

The country’s overall performance in 

three broad policy categories—Ruling 

Justly, Encouraging Economic Freedom, 

and Investing in People; MCC’s 

opportunity to reduce poverty and 

generate economic growth in a country; 

and Availability of funds to MCC. 

Performance of Policy Categories 

Section 607 of the Act requires that 

the Board’s determination of eligibility 

be based ‘‘to the maximum extent 

possible, upon objective and 

quantifiable indicators of a country’s 

demonstrated commitment’’ to the 

criteria set out in the Act. For FY11, 

there will be two groups of candidate 

countries—low income countries (LIC) 

and lower middle income countries 

(LMIC). As outlined in MCC’s Report on 

Countries that are Candidate Countries 

for Millennium Challenge Account 

Eligibility for Fiscal Year 2011 and 

Countries that would be Candidates but 

or Legal Prohibitions (August 2010), LIC 

candidates are those countries that have 

a per capita income equal to or less than 

$1,905 and are not ineligible to receive 

United States economic assistance 

under part I of the Foreign Assistance 

Act of 1961 by reason of the application 

of any provision of the Foreign Assistant 

Act or any other provision of law. LMIC 

candidates are those countries that have 

a per capita income between $1,906 and 

$3,945 and are not ineligible to receive 

United States economic assistance 

under the same stipulations. 

The Board uses seventeen indicators 

to assess the policy performance of 

individual countries (specific 

definitions of the indicators and their 

sources are set out in the attached 

Annex A). These indicators are grouped 

for purposes of the FY11 assessment 

methodology under the three policy 

categories listed below. 

Ruling Justly 

Civil Liberties 

Political Rights 

Voice and Accountability 

Government Effectiveness 

Rule of Law 

Control of Corruption 

Encouraging Economic Freedom 

Inflation 

Fiscal Policy 

Business Start-up 

Trade Policy 

Regulatory Quality 

Land Rights Access 

Investing in People 

Public Expenditure on Health 

Public Expenditure on Primary 

Education 

Immunization Rates 

Girls’ Primary Education Completion 

Natural Resource Management 

In making its determination of 

eligibility with respect to a particular 

candidate country, the Board will 

consider whether a country performs 

above the median in relation to its 

income level peers (LIC or LMIC) on at 

least three of the indicators in each of 

the Ruling Justly, Encouraging 

Economic Freedom, and Investing in 

People categories, and above the median 

on the Control of Corruption indicator. 

One exception to this methodology is 

that the median is not used for the 

Inflation indicator. Instead, to pass the 

Inflation indicator a country’s inflation 

rate must be under a fixed ceiling of 15 

percent. The Board may also take into 

consideration whether a country 

performs substantially below the 

median on any indicator (i.e., below the 

25th percentile) and has not taken 

appropriate measures to address this 

shortcoming. 

Approach to Income Classification 

Transition 

Each year a number of countries shift 

income groups, and some countries 

formerly classified as LICs suddenly 

face new, higher performance standards 

in the LMIC group. As a result, they 

typically perform relatively worse as an 

LMIC, even if they performed relatively 

well as an LIC, and maintained or 

improved performance over the 

previous year in absolute terms. To 

address the challenges associated with 

sudden changes in performance 

standards for these countries, MCC has 

adopted an approach to income category 


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