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November 19, 2001

WHEREAS, the Government of the United States of America (USG) and the Government of the Republic of the Philippines (GOP) consider the success of the peace process in Mindanao and the Sulu Archipelago (“Mindanao”) to be of vital importance for national, regional, and global security, and for the campaign against global terrorism;

WHEREAS, the USG and the GOP consider the economic and social development of Mindanao to be an essential factor in achieving an enduring peace and in creating, in turn, the positive investment climate necessary to meet the aspirations of the Filipino people;

WHEREAS, the USG, acting through the United States Agency for International Development (USAID), and the GOP have since 1990 jointly established a number of successful mechanisms to promote economic and social development and the peace process in Mindanao; and

WHEREAS, USAID and the GOP recognize that the critical state of the peace process and the urgency of the campaign against terrorism require an expanded, multi-sectoral and multi-year effort in Mindanao.

NOW THEREFORE, USAID, and the GOP hereby set forth their intent in this Memorandum of Intent to expand their bilateral cooperation for peace and development in Mindanao as follows:

1. USAID intends to make available up to $55 million in Fiscal Years 2001 and 2002, subject to the availability of funds and the mutual agreement of the parties and any applicable U.S. laws and regulations, for a coordinated, multi-year program of activities in Mindanao. It is anticipated that such assistance will finance the activities described in Annexes A through F to this Memorandum, and will be for the purposes of reintegrating former combatants into the peacetime economy; promoting community development in areas affected by conflict; expanding sustainable microfinance; strengthening Mindanao’s economic base of infrastructure and production; building sustainability of Mindanao’s private sector and producer organizations; strengthening the ability of decentralized local governments to root out corruption and provide responsive public services; strengthening public and private health and family planning services; and strengthening the capacity of Mindanao’s local governments to protect and rationally utilize their scarce natural forest and coastal resources.

2. The GOP will continue to expand Mindanao’s share of the national infrastructure investment, and will allocate expanded budgetary resources from the funds generated by USG commodity assistance and other sources to support the Mindanao activities under the program of peace and cooperation jointly agreed to in this Memorandum.

Signed at Washington, D.C., this 19th day of November, 2001.

ANNEX A
ECONOMIC GROWTH

For over a decade, USAID has focused economic growth efforts in Mindanao. In recognition of the special priority that the Government of the Philippines, under the Administration of President Gloria Macapagal-Arroyo has placed on the development of Mindanao, the Philippines' poorest region, USAID is now substantially expanding its on-going support for economic growth activities in Mindanao. These activities, as described below, focus on helping people in conflict-affected areas re-build a peaceful economy and community life, and on creating a region-wide economic environment that generates jobs and stability for the people.

Total Fiscal Year 2001 and 2002 Funding up to $17,806,000

Livelihood Enhancement and Peace (LEAP)

USAID LEAP Program to directly assist approximately 12,000 former combatants and their families in 400 communities to integrate themselves into the peacetime economy, will be carried out under the coordination of the GOP's Mindanao Economic Development Council (MEDC). LEAP is planned to be a broad and integrated combination of efforts involving the affected beneficiaries, Muslim organizations, local officials, and the private sector, and aims to develop productive capacities, build small infrastructure, and undertake social development efforts.

Growth with Equity in Mindanao (GEM)

The GOP and USAID will continue their long and fruitful partnership for promoting Mindanao's economic development through USAID's GEM project by focusing on achieving the sustainability of the producers associations and business organizations that the project has supported. GEM will also continue to provide assistance in identifying infrastructure projects for Mindanao, coordinating other efforts such as LEAP, and supporting policy reforms to benefit Mindanao's producers.

Advocating Trade and Investment Liberalization (ATIL)

USAID will maintain its on-going relationship with Philexport, the Philippine Government's public-private champion of trade and investment development, by continuing to provide it with grant assistance. This assistance will enable Philexport, a business-membership organization, to promote competitiveness in Mindanao and other regions, and to remain a leading business advocate of economic reforms that benefit investment and job creation in Mindanao.

Accelerating Growth, Investment, and Liberalization with Equity (AGILE)

In coordination with its Philippine Government partners, the Department of Finance and the National Economic Development Agency of the Philippines, USAID will continue to make policy development expertise available under its AGILE project in areas vital to Mindanao's economy such as ports management, local government finance, biotechnology, and anti-corruption, and also in the national economic policy arena.

ANNEX B
MICROFINANCE

In support of the GOP's goal of expanding microentrepreneurs1 access to credit and other financial services, US AID will increase its support to microfinance in Mindanao with a wide-ranging program of technical strengthening, policy reform, and institutional innovation.

Microfinance institutions in Mindanao are expanding rapidly, and in a sustainable way, with USAID's assistance. In addition to helping create a supportive policy and regulatory environment for microfinance within the central bank and Department of Finance in Manila, USA1D is supporting two microfinance programs operating in Mindanao as follows:

Total Fiscal Year 2001 and 2002 funding, up to $10,220,000

Microenterprise Access to Banking Services in Mindanao (MABS-M)

USAID's assistance improves both lending and deposit-management services.

Working with its Philippine private sector partner organization, the Rural Bankers' Association of the Philippines, USAID will expand its assistance to rural banks in Mindanao to reach more beneficiaries among Mindanao's micro enterprises and low-income population. A special effort will be made to bring microfinance into areas where access to the Philippines' unique rural bank network has been limited to date.

By also building the capacity of the Rural Bankers Association of the Philippines, USAID will help ensure the continuing, future expansion of this movement.

Credit Union Empowerment and Support Program (CUES)

USAID plans to extend its on-going assistance to the deposit-taking cooperative movement to help its leadership to establish a sustainable framework within which the movement can operate, and to reach out increasingly to the under-represented population in Mindanao.

Deposit-taking cooperatives participating in USAID's program to date are demonstrating remarkable success in improving service and security, and thus in expanding the number of benefiting cooperative members by tens of thousands — all with financial sustainability.

Credit Policy Improvement Project (CPIP)

USAID will continue its assistance to the Government of the Philippines' National Credit Council to enable the creation of a standard chart of accounts and management standards in support of the credit cooperative movement. Under CPIP, USAID and the National Credit Council are helping ensure that cooperative members' funds are safe and the benefits of microfinance are sustainable.

ANNEX C
LOCAL GOVERNANCE

In conjunction with the priority emphasis the Government of the Philippines is giving to combating corruption and improving public administration, particularly at the local government level, USAID will draw on its nationwide experience in assisting local governments in the Philippines to put in place a focused program for Mindanao and the Autonomous Region of Muslim Mindanao (the ARMM), as follows:

Total Fiscal Year 2001 and 2002 Funding Up To $2,082,000

Transparent and Accountable Governance II (TAG II)

In coordination with the GOP's Department of the Interior and Local Government, USAID will provide grant support to The Asia Foundation's TAG II project to help local governments in Mindanao, and particularly in the ARMM, to benefit from the experience of local governments elsewhere in the country. Since the adoption of the Local Government Code in 1991, the Philippines has developed considerable resources that, with USAID's help, local governments in Mindanao can adopt and put to use for public service improvement.

TAG II will also support innovative techniques for local governments in Mindanao to identify and combat corruption. The anti-corruption efforts of Mindanao's local government will benefit from anti-corruption networking that the GOP and USAID are helping develop at the national level.

Finally, TAG II will be a resource for Mindanao's local governments in attracting technical support from other USAID-assisted projects in the health and environment fields.

ANNEX D
RULE OF LAW

USAID will provide support under two nationwide programs, to improve the administration of justice on Mindanao.

Total Fiscal Year 2001 and 2002 Funding, up to $30,000.

Reform of the Administration of Justice through Coalition Advocacy (RAJCA)

RAJCA focuses on making court administration more efficient and accessible.

Barangay Justice Service System (BJSS)

BJSS focuses on alternative conflict resolution at the local level, and on making municipal level court administration more efficient.

ANNEX E
ENVIRONMENTAL PROTECTION AND MANAGEMENT

USAID will work together with the Philippines' Department of Environment and Natural Resources, to carry out a new program, started in FY 2001, to strengthen the ability of national and local government units and communities to manage coastal resources, forests and solid waste. The program will focus on improving governance affecting environmental resources, by promoting transparency and accountability in awarding licenses, leases and contracts; in collecting and spending fees; and in enforcing environmental laws. A special emphasis will be placed on assisting Moro National Liberation Front (MNLF) former combatants and their communities in Mindanao.

Total Fiscal Year 2001 and 2002 Funding up to $3,450,000

The EcoGovernance Program (EcoGov)

The EcoGov program will support efforts to address over-capacity in the fishing sector, to streamline the operations of community managed forests, and to establish new contracting approaches for solid waste management.

Training and follow-on technical assistance in improving management of coastal resources, forests and solid waste will be provided to local governments and communities, and to other concerned entities including non governmental organizations (NGOs) and the private sector. Training will also be provided for the judicial sector, and others such as provincial and local government staff, to equip them to better support the ¦'enforcement of environmental laws.

EcoGov program activities, particularly training and mentoring, will be closely linked with the USAID-funded Transparent and Accountable Governance II (TAG II) program of the Asia Foundation.

Key national and local organizations will be supported in their efforts to identify, analyze and improve priority policies under the EcoGov program.

Finally, informational activities will be carried out to inform the public on key policy issues, and to build the political will to improve environmental management and enforcement.

ANNEX F
POPULATION, HEALTH AND NUTRITION

In partnership with the Philippine Government, non governmental organizations (NGOs) and the private sector, USAID will continue to provide a comprehensive program of family planning, health and nutrition activities, all of which operate in Mindanao either as part of a nationwide program, or with Mindanao-specific interventions. Program activities listed below address, in an integrated fashion, health policy, advocacy, and sector reform; health service delivery; infectious diseases, including HIV/AIDS; nutritional supplementation/fortification; and family planning.

Total Fiscal Year 2001 and 2002 Funding up to $17,909,000

Health Policy and Advocacy — supports the creation and promotion of an environment conducive to programs and systems that will improve the delivery of family planning, maternal and child health, HIV/AIDS and other infectious diseases services.

Health Sector Reform — builds the capacity of the Department of Health and the local government units to better provide and manage public health services.

Improving Quality of Health Services — enhances the quality of health services in public facilities through standard setting and awards.

Local Government Health Services — strengthens existing public sector health services through performance-based grants to local government units.

Midwife Entrepreneurs — increases private sector family planning and maternal and child health services by developing a franchise network of private midwife clinics.

Private Sector Tuberculosis Prevention — strengthens tuberculosis diagnosis and treatment among private physicians and clinics.

HIV'/AIDS/Infectious Disease Prevention — combats the growing complacency regarding the threat of HIV/AIDS cases and undertaking education activities for groups at risk, and to control the incidence of tuberculosis, as well as malaria.

Vitamin A Supplementation — boosts Vitamin A supplementation in the seven regions with the most vitamin A deficiency.

Micronutrient Fortification — makes Vitamin A, iron and iodine fortified foods widely available in order to increase the micronutrient intake, particularly among pre-school children and women of reproductive age.

Family Planning Communications — supports the development and implementation of family planning communication and advocacy programs of the Department of Health, the Commission on Population and other groups.

Private Sector Family Planning — expands private sector provision of a full range of high quality family planning and reproductive health services to lower and lower-middle income Filipino families at affordable prices.

Contraceptive Commodities — supplies a portion of the national requirement for contraceptives, to ensure national responsibility for the contraceptive supply; increase domestic spending for contraceptives; promote national and local government cost sharing for contraceptives; and promote increased private sector participation in the provision of family planning services.