[Federal Register Volume 75, Number 191 (Monday, October 4, 2010)]
[Notices]
[Pages 61197-61216]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-24820]
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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.
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SUMMARY: In accordance with Section 610(b)(2) of the Millennium
Challenge Act of 2003 (Pub. L. 108-199, Division D), the Millennium
Challenge Corporation (MCC) is publishing a summary and the complete
text of the Millennium Challenge Compact between the United States of
America, acting through the Millennium Challenge Corporation, and the
Republic of 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 sub-project, 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 post-harvest
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,
[[Page 61198]]
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 five-year 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 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 (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:
[[Page 61199]]
(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
[[Page 61200]]
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 (``MCA-Philippines''), 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
[[Page 61201]]
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 semi-annual basis, conduct,
or cause to be conducted, financial audits of all Disbursements of MCC
Funding covering the period from signing of this Compact until the
earlier of the following December 31 or June 30 and covering each six-
month period thereafter ending December 31 and June 30, through the end
of the Compact Term. In addition, upon MCC's request, the Government
will ensure that such audits are conducted by an independent auditor
approved by MCC and named on the list of local auditors approved by the
Inspector General of MCC (the ``Inspector General'') or a United
States-based certified public accounting firm selected in accordance
with the ``Guidelines for Financial Audits Contracted by MCA'' (the
``Audit Guidelines'') issued and revised from time to time by the
Inspector General, which are posted on the MCC 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: [email protected] (Vice President, Compact
Operations), [email protected] (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:
[email protected].
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
[[Page 61202]]
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
[[Page 61203]]
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.
[[Page 61204]]
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
[[Page 61205]]
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 sub-project 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 Inter-Barangay 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 small-scale
rural infrastructure sub-projects identified by the community. The
municipalities and barangays in which sub-project 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 sub-projects. 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
well-targeted 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
[[Page 61206]]
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
small-infrastructure 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 MCC-funded sub-projects and will target
those sub-projects 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 ton-kilometers and
89 percent of passenger ton-kilometers. 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\
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\1\ ``Philippines: Critical Development Constraints,'' Asian
Development Bank, December 2007.
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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.
[[Page 61207]]
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.
---------------------------------------------------------------------------
\2\ ``Philippines: Critical Development Constraints,'' Asian
Development Bank, December 2007, p. 49.
---------------------------------------------------------------------------
In addition, tax-related patterns of non-compliance 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.
---------------------------------------------------------------------------
\3\ Ibid. p. 26.
---------------------------------------------------------------------------
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 Sub-Activity.
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 Sub-Activity.
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 broad-based, 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
[[Page 61208]]
Philippines. The outlines of the eTIS sub-Activity and its emphasis
on process redesign and training are based on long-standing
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 anti-corruption 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 MCA-
Philippines 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
MCA-Philippines, 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, MCA-Philippines will
have a Stakeholders' Committee to continue the consultative process
during implementation of the Program. The governance of MCA-
Philippines will be set forth in more detail in the Establishment
Decree, the Program Implementation Agreement, and the internal
regulations of MCA-Philippines (``MCA-Philippines 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 MCA-Philippines 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 MCA-Philippines
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 MCA-Philippines
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 non-governmental
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 MCA-Philippines 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,
[[Page 61209]]
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 MCA-Philippines 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 MCA-Philippines, will engage a fiscal agent (a ``Fiscal
Agent''), who will be responsible for assisting the Government with
its fiscal management and ensure appropriate fiscal accountability
of MCC Funding, and whose duties will include those set forth in the
Program Implementation Agreement.
(f) Procurement Agent.
Unless MCC otherwise agrees in writing, the Government, directly
or through MCA-Philippines, 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 MCA-Philippines 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 7.30 11.50 15.90 9.00 5.60 1.00 50.30
Reform Activity...............
(b) Revenue Integrity ......... 0.50 3.35 0.15 ......... ......... 4.00
Protection Services (RIPS)
Activity......................
----------------------------------------------------------------------------
Sub-Total.................. 7.30 12.00 19.25 9.15 5.60 1.00 54.30
----------------------------------------------------------------------------------------------------------------
2. KALAHI-CIDSS:
(a) Capacity Building and ......... 4.91 2.84 1.48 1.11 0.28 10.62
Implementing Support..........
(b) Grants for Community ......... 1.82 20.43 17.99 30.81 24.46 95.51
Projects......................
(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 5.09 6.53 0.82 0.87 0.95 ......... 14.26
Mitigation....................
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 4.46 6.50 6.64 6.39 6.48 6.44 36.91
Administration & Audit....
============================================================================
Total Estimated MCC 25.06 43.56 89.74 93.32 105.71 76.52 433.91
Contribution..........
----------------------------------------------------------------------------------------------------------------
[[Page 61210]]
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''). MCA-Philippines 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.
---------------------------------------------------------------------------
\4\ As the municipalities are due to be randomly selected,
baseline figures are not yet known.
\5\ These figures are indicative.
\6\ The 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.
\7\ The 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.
Table 1--M&E Indicators for KALAHI-CIDSS Project
----------------------------------------------------------------------------------------------------------------
Baseline
Result Indicator Definition of indicator \4\ Year 5 \5\
----------------------------------------------------------------------------------------------------------------
Objective Level
----------------------------------------------------------------------------------------------------------------
Increased responsiveness of Local Use of inclusive Percentage of project TBD 80%
Government Units (LGUs) to Community Driven municipal local
community needs. Development (CDD) government units
processes by local (MLGUs) that have
governments. 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.
LGU provision of funds Percentage of MLGUs that 0% 80%
for O&M. provide funding support
for KALAHI-CIDSS sub-
project O&M.
LGU application of CDD Number of project MLGUs TBD TBD
practices to non-KALAHI- that pass ordinances/
CIDSS activities. resolutions adopting
CDD principles.
Increased community engagement in Participation of women in Number of women TBD TBD
development activities. local government. representatives in
targeted areas.
Community engagement in Percentage of MCC-funded 0% 80%
development activities. KALAHI-CIDSS-developed
community organizations
that have satisfactory
organizational
performance ratings.
[[Page 61211]]
Percentage of 0% 30%
communities that
attract additional
funding for development
activities after the
KALAHI-CIDSS Project is
completed.
Increased value of sub-project Aggregate value of (Varies, please see ........... ...........
benefits \6\. benefits of sub- below).
projects..
----------------------------------------------------------------------------------------------------------------
Outcome Level
----------------------------------------------------------------------------------------------------------------
Increased LGU engagement......... LGU provision of funds... Percentage of LGUs that 0% 90%
provide at least 80% of
Memorandum of Agreement
(MOA) funding
requirements.
LGU provision of Percentage of LGUs that 0% 90%
technical support. provide at least 80% of
MOA technical support
requirements.
Increased community engagement... Barangay assembly Percentage of barangay TBD 80%
participation. assemblies with 80% of
community households
represented.
Marginalized group Percentage of barangay TBD 80%
participation. assemblies with 65% of
youth, women,
indigenous people and
poorest households
represented.
Increased value of sub-project Time savings............. ........................ TBD TBD
benefits \7\.
Labor force participation ........................ TBD TBD
(by age and gender).
School enrollment........ ........................ TBD TBD
Number of beneficiary ........................ TBD TBD
farming households.
Yield of paddy rice...... ........................ TBD TBD
Water consumption (by ........................ TBD TBD
use).
Use of barangay health ........................ TBD TBD
facilities.
Post-harvest losses...... ........................ TBD TBD
----------------------------------------------------------------------------------------------------------------
Output Level
----------------------------------------------------------------------------------------------------------------
Sub-projects delivered........... Sub-projects completed... Number of completed sub- 0 3400
projects (by type).
Sub-projects sustained........... Sub-projects sustained... Percentage of sub- 0% 80%
projects that pass
functionality audits or
receive satisfactory or
higher ratings of
sustainability.
----------------------------------------------------------------------------------------------------------------
Table 2--M&E Indicators for Secondary National Roads Development Project
----------------------------------------------------------------------------------------------------------------
Definition of
Result Indicator indicator Road Baseline Year 5 Year 20
----------------------------------------------------------------------------------------------------------------
Objective Level
----------------------------------------------------------------------------------------------------------------
Net incomes of road users Costs to road Aggregate value Wright-Taft- NA 5.2 9.5
increased. users. of time Borongan-
savings (in Guiuan.
2009US$m) \8\.
Change in Wright-Taft- NA 9.4 16.5
aggregate Borongan-
vehicle Guiuan.
operating cost
(in 2009US$m)
\9\.
----------------------------------------------------------------------------------------------------------------
Outcome Level
----------------------------------------------------------------------------------------------------------------
Improved road quality....... Roughness...... International Wright-Taft- \10\ 7.1 1.8 5.8
Roughness Borongan-
Index of the Guiuan.
road segments
supported by
the Compact.
Increased vehicle activity.. Average Annual AADT on the Wright-Taft- 1,179 1,450 2,720
Daily Traffic road segments Borongan-
(AADT). supported by Guiuan.
the Compact.
Lower maintenance costs..... Maintenance Reduction in Wright-Taft- NA 0.4 0.3
savings. annual Borongan-
maintenance Guiuan.
spending (in
2009US$m) \11\.
----------------------------------------------------------------------------------------------------------------
[[Page 61212]]
Output Level
----------------------------------------------------------------------------------------------------------------
Roads rehabilitated or built Total length... KM of road Wright-Taft- 0 222 222
sections Borongan-
completed--reh Guiuan.
abilitated.
----------------------------------------------------------------------------------------------------------------
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 \12\ TBD TBD
potential that is
actually collected (VAT
only).
Decreased incidence of corrupt Perceptions of corruption DOF staff and the general TBD TBD
activities within Department of public's perceptions
Finance (DOF). that DOF staff are
engaged in corrupt
activities.
Perceptions that DOF is TBD TBD
taking action to fight
corruption.
----------------------------------------------------------------------------------------------------------------
eTIS sub-Activity
----------------------------------------------------------------------------------------------------------------
Outcome Level
----------------------------------------------------------------------------------------------------------------
Increased number of returns....... Number of returns filed.. Number of tax returns TBD TBD
filed by individuals and
corporate business at
BIR Revenue District
Offices that have
implemented eTIS.
Corruption perceptions............ Perceptions of change in Perceptions of corruption TBD TBD
incidence of corruption as specifically related
among BIR employees. to eTIS implementation
e.g. use of electronic
audit.
Efficiency perceptions............ Perceptions of Perceptions of efficiency TBD TBD
organizational as specifically related
efficiency among BIR to eTIS implementation.
employees.
----------------------------------------------------------------------------------------------------------------
Output Level
----------------------------------------------------------------------------------------------------------------
Increased number of automatically- Number of audits......... Automatically-generated 0 TBD
generated audits. (by eTIS) audits broken
down by large taxpayer
unit and RDOs that have
implemented eTIS.
----------------------------------------------------------------------------------------------------------------
Automated Audit Tools (AATs) sub-Activity
----------------------------------------------------------------------------------------------------------------
Outcome Level
----------------------------------------------------------------------------------------------------------------
Increased revenue................. Revenue collection per Average collection per 2,500,000 4,300,000
audit. firm using Automated
Audit Tools AATs (in
pesos).
----------------------------------------------------------------------------------------------------------------
Output Level
----------------------------------------------------------------------------------------------------------------
Decreased time to complete an Time to complete an audit Calendar days from start 117 44
audit. of audit to completion.
Increased percentage of audits Percentage of audit cases Large taxpayer unit audit 2.9% 100%
using AATS. performed using AATS. cases performed using
only AATS.
Reduced opportunities for Time spent at taxpayer Hours to perform all 335 50
discretion. premises per audit. audit functions needed
at taxpayer premises.
----------------------------------------------------------------------------------------------------------------
Public Awareness Campaign sub-Activity
----------------------------------------------------------------------------------------------------------------
Outcome Level
----------------------------------------------------------------------------------------------------------------
Increased revenue................. Revenue from target group Target group to be TBD TBD
defined based on project
type.
Increased satisfaction............ Taxpayer satisfaction Improvement in customer TBD TBD
with BIR services. satisfaction survey
scores.
[[Page 61213]]
Increased awareness.............. Perception of change Awareness of the TBD TBD
based on specific campaign, the available
message. BIR services and/or
taxpayer obligations.
----------------------------------------------------------------------------------------------------------------
RIPS Activity
----------------------------------------------------------------------------------------------------------------
Outcome Level
----------------------------------------------------------------------------------------------------------------
Increased number of resolved cases Number of ``successful'' Number of personnel 28 140
case resolutions charged by RIPS who are
(cumulative). then suspended,
dismissed or convicted.
Corruption perceptions............ Perceptions of corrupt Perceptions among DOF TBD TBD
activities within DOF staff and the general
agencies. public.
----------------------------------------------------------------------------------------------------------------
Output Level
----------------------------------------------------------------------------------------------------------------
Increased number of investigations Number of complaints Number of cases opened... 110 400
investigated
(cumulative).
Decreased time to complete an Time taken to complete Days from case opened to 120 60
investigation. investigation (average). resolution.
Increased number of DOF personnel Personnel charged Number of DOF personnel 67 500
charged. (cumulative). charged with either
graft or corruption.
----------------------------------------------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\8\ These 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.
\9\ These 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).
\10\ This baseline is a visual estimation, not an International
Roughness Index measure.
\11\ These 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.
\12\ There 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.
---------------------------------------------------------------------------
(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, MCA-Philippines is
responsible for implementation of the M&E Plan. MCA-Philippines 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 MCC-supported 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
[[Page 61214]]
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, MCA-Philippines 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 MCA-Philippines 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
[[Page 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 MCA-Philippines 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.
[[Page 61216]]
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